Financial Options and Solutions
What are your options for funding your elderly care service in your home?
Most people want to find a way to pay for care and protect the capital. So let’s examine the options for a person having Care at Home. The first thing you need to establish is the shortfall between your income and the cost of your care, plus any personal expenses including the upkeep of the house. Once this is established the question then arises of how best to fund it. These are the main possibilities but there are variations.
Using the interest from a deposit account
Traditionally, people think of looking for the deposit account that pays the best interest rate. In today’s climate, one would have to have a very large capital sum so that the interest alone would meet this shortfall. The best instant access deposit account pays just 2% and then there is tax to pay reducing that to just 1.6%. For the vast majority of people, this is just not feasible and leads to quick erosion of what capital there is. For instance, if your shortfall is £250 a week, you would have to have capital of some £750,000 if you just want the interest to pay the shortfall.
Using Existing Investments
Some of these may be suitable for making regular withdrawals to meet the shortfall. A careful assessment by an advisor will soon tell you.
Making New Investments
The money you have on deposit may be better used in another type of investment with a tax-free withdrawal facility, to cover the shortfall.
This enables a lump sum and/or a monthly amount to be paid into your bank account, to meet the shortfall, by releasing some of the value in your house.
Immediate Needs Annuity
This is a single, one off premium, which purchases a Care Plan that will guarantee to pay your monthly shortfall, direct to the Care Provider, free of tax, for a person’s lifetime. This means that the remaining capital is protected. The cost depends upon age, state of health and gender. The payments can be indexed to cope with the increase in fees. Typically, the return on capital from these schemes is between 18% and in excess of 30%.
Deferred Needs Annuity
This is essentially the same scheme but the monthly payment does not start paying out for a selected period of say one, two or up to 5 years. Thus is cost is a lot less and continues to decrease the longer the deferred period.
If you do not have a lump sum available you can still take out a Care Plan by utilising the value of your property with the Care Plan Payment Option, (CPPO). If you are living in a care home, this scheme also means you do not have to sell your house to pay for care and it can be rented out to help reduce the shortfall.. Indexation is also available with this plan.
So, what is best for you?
The short answer is, it depends. If you would like a report, setting out all the options, all you have to do is provide all the facts about your circumstances and you can be sent a bespoke report which sets out all your options. Armed with these facts you can be put in a position to make an informed choice. The overall aim being to find the most efficient way of paying for your care and protecting your capital.