The Planning Series: Self-funding for care needs, planning for an unknown future

September 2020

The Planning Series: Self-funding for care needs, planning for an unknown future

If this year has taught us anything, it’s that there is no way of knowing what the future holds. While this can be frightening for many, planning for an unknown future and considering self-funding for potential care needs need not be complex or stressful. The final instalment in our Planning Series looks at what options are available for self-funding for care needs and how you can plan for the future to help put your mind at ease. If you are looking for a more personalised strategy, visit www.plutuswealth.co.uk to contact one of our independent financial advisers.

Will I need to self-fund?

Unlike health care, social care is rarely free. There is funding available from local councils. However, it is means-tested, and the thresholds are low. If you own your home or have savings of more than £23,250 (applicable to England and Northern Ireland) the chances of receiving any council funding are pretty low.

Don’t be tempted to think that giving away assets in the form of gifts to friends and family will help you reach the threshold for council assistance. Nor will selling your home for a nominal fee. Such actions will be scrutinised and can be deemed to be ‘deliberate deprivation of assets’. This can result in their value being taken into account during means testing even though you no longer own the asset.

What are your options then, so that you don’t have to worry about money? We look at some financial planning routes that enable you to plan for an uncertain future.

Investments

Making an investment early on will ensure that you get the most out of it. Short-term market fluctuations tend to iron themselves out over the medium to long term. This makes them a suitable future-planning tool. There are numerous ways of investing, including: investment funds, bonds, and trusts, each with its own pros and cons. Your personal circumstances will inform the decision of which is best for you. For an introduction to investments, take a look at our recent article on how to get the most out of your investment.

Equity release

Releasing the equity in your home will give you a lump sum that can go towards your care home costs. However, the money will need to be repaid when the property is sold. This is why it is important to consider market fluctuations for this option.

Existing insurance policies

Check your existing insurance policies, as they may provide some cover for future care requirements. It may also be possible to update any existing policies to add such costs. Alternatively, you could consider a new insurance policy for this purpose. With so many options on the market, it would be beneficial to seek advice and help from an independent financial adviser before purchasing a policy.

Immediate needs annuities

If you need to pay for care sooner rather than later, this insurance policy, also known as an ‘immediate needs care fee payment plan’ may be right for you. It works by investing a lump sum into the policy – usually from your pension – which then pays out a regular sum, typically on a monthly, quarterly or annual basis. This can then be used to pay for your care home needs. The factors that help determine the best annuity option for you will vary, so it is important to get advice from an independent financial adviser first. Such factors include:

  • Income tax payments. There is no income tax levied if the payment is made directly to a care home. However, care home charges could rise faster than payments. There are ways to ensure your annuity increases over time, something that an independent financial adviser can help you with.
  • Life expectancy. Prices are based on the expected length of time one may need to be in care for. While an immediate plan gives peace of mind, there is a trade-off: if you were to die prematurely, it could result in a wasted premium. There are options available to insure against this, but they can be pricey.
  • Health and age. They will determine the cost of the policy and prices can vary considerably between providers.

Let us help you plan for the future

Planning for the future can be frightening for some and a given for others. Either way, you are not alone. Plutus Wealth has a team of trained, knowledgeable independent financial advisers on hand. Our job it is to scour the market, looking for the best products for our clients. Start planning for an uncertain future by getting in touch with us on 020 7871 5200 or at info@plutuswealth.com, and we can plan for it together.

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