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Long Term Care

Our Later Life Care Planning Services

Our Later Life Care Planning Services

The cost of providing care in later life can quickly erode the value of your estate, thereby severely reducing the amount you eventually leave to your beneficiaries. Most people don't realise that it's actually possible to acquire immediate care cover even at the point of need. This can then allow you to plan for the cost and hopefully protect the rest of the estate.

Immediate Lifetime Care is for clients already suffering from physical or mental disability, who are either already receiving or about to receive care. For a single premium it aims to pay part or all of the costs of a client’s care for the rest of their life.

Clients must be aged 60 or over and be receiving care because they need assistance with everyday tasks, or need constant supervision due to conditions such as dementia.

Income from Immediate and Deferred Care Plans can be paid monthly or four weekly. All income is paid in advance, and once selected, the income payment frequency can’t be changed.

Income payments from an Immediate Care Plan will start on the plan commencement date, with the Deferred Care Plan income beginning on the chosen anniversary of the plan commencement date. However, clients may choose at the outset a specific date in the month for income to be paid. In this case the first payment will be adjusted accordingly.

Income is usually paid directly to a Registered Care Provider and is currently tax-free. Payments to Local Authorities also qualify for tax relief. If the income is paid to anyone else, it'll be subject to tax.

Death benefit options

A Care Funding Plan guarantees to pay an income for the rest of a client’s life, but this income will stop when they die, and no further benefits will normally be payable.

Clients may be concerned that, if they die soon after the plan starts, the income paid could be less than their premium. Should they die early, then the benefits below will help clients to protect a proportion of that premium:

Money Back Guarantee - as standard

Some insurance companies offer a Money Back Guarantee (MBG) as standard on their care plans. If the annuitant dies in the first six months of taking out their care plan, the insurance company repay a percentage of the premium to their estate/beneficiaries, less any income already paid.

This type of protection typically looks like this:

Month of DeathAmount Returned
Month 1100% of amount invested less the total amount paid from the plan
Months 2-350% of amount invested less the total amount paid from the plan
Months 4-625% of amount invested less the total amount paid from the plan
 If death occurs within the first 12 months and Covid-19* is recorded on the death certificate as a contributory cause of death, the Month 1 Money Back Guarantee will apply.

*also includes Coronavirus or SARs-Cov-2 as a contributory cause of death.

For a more comprehensive protection of the amount paid for the plan, you can buy capital protection with your Immediate Care Plan.

Capital protection option

Capital protection is a Decreasing Term Assurance plan which allows you to protect up to 75% of your initial premium for a given period.

The amount protected reduces over time, in line with the income payments made. Once the total payments made equal the total amount protected, an annuitant's estate won’t receive any benefits when they die.

You can buy capital protection for a single, one-off price, which you can do at the same time you pay for your Immediate Care Plan. The cost depends on the amount protected.

Flexibility

It is normally possible to change the recipient of the income if an annuitant's circumstances change, such as moving care homes, but any payment made to anyone other than a Registered Care Provider may result in a tax charge (please see the 'Taxation of Benefit Payments' page for more information).

Care fees can increase over time due to inflation, just like everything else. There are also other outside influences which can affect the price of care fees, including treatment, equipment and staff costs.

To help reduce the risk of a shortfall, clients can choose at outset for the income payable from an Immediate or Deferred Care Plan to increase each year by a fixed percentage. This can range from anything between 1% and 10%.

Alternatively, under the Immediate Care Plan, clients can choose for their income to increase each year in line with Retail Price Index (RPI). This will link the income to the general UK rate of inflation, and can help maintain the buying power of the income. However, in the event of deflation, this can also mean that income payments may fall.

Please note that, once chosen, the escalation rate and the date it takes affect can’t be changed.

Any income paid by the insurance company to a registered care provider in respect of care for the annuitant can be made tax-free. To qualify, the care provider must be registered with one of the following:

Payments to Local Authorities in respect of care are also tax-free.

Where any income is paid directly to the annuitant, a non-registered care provider or a third party, the income will be subject to tax in line with treatment for Purchased Life Annuities. 

In this case, income is split into a capital and an interest element. The capital element is paid tax-free and the interest element is subject to income tax at the savings rate. The insurance company is required to deduct tax at the basic rate for savings (currently 20%) from the interest element.

The capital content is determined in line with mortality tables specified by legislation based on the customer’s circumstances at the start of the policy.

Before income can be paid on this basis, the customer would need to complete HMRC form PLA6. Non taxpayers can also complete HMRC form R89, in which case the insurance company would not deduct any tax.

This income is not taxed through the PAYE system. The customer remains responsible for ensuring that the correct amount of tax is paid and may have to pay more or claim a partial repayment.



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