Immediate Care Plan

An Immediate Care Plan is an annuity that has been specifically designed for those who need to provide an income for life when looking to pay for the cost of care.

The amount of income that you'll receive from an Immediate Care Plan depends on a number of factors including:

• Your age
• Your health
• The current annuity rate
• The size of the lump sum you contributed

Eligibility for an Immediate Care Plan

Immediate Care Plans are designed specifically for the elderly, whose assets top the maximum threshold for financial assistance.

They must also be unable to manage with one aspect of daily living (ADL) or supervision in the case of mental impairment. These ADLs are defined as:

• Mobility
• Washing
• Dressing
• Transferring (being able to get on and off the toilet and in and out of bed without help)
• Feeding
• Continence
• Mental ability

Applicants for an Immediate Care Plan will be medically assessed to find out their needs and how much a policy would cost them.

Advantages

One of the main advantages of purchasing an Immediate Care Plan is that it can take away some of the worry and provide peace of mind that a guaranteed income will be paid for the rest of your life, regardless of how long you live. As long as the income is paid to a registered care provider the income payments will be tax free. There is an option to protect some or possibly all of your capital investments in the event of your death through capital protection plans.

The income can be index-linked to help you keep up with the rising cost of care fees; of course this will increase the cost of the annuity. A further benefit of knowing that a guaranteed amount will be paid for life is that it helps to protect the remaining capital and you can consider how this may be invested or passed on to future generations.

Issues to consider

Neither you nor the insurance company can see into the future - and if you were to die relatively soon after purchasing the annuity, the income you would have received might be less than the amount you paid to buy the annuity. In this case you will have made a loss. Even if you purchase capital protection you may not be covered for the full amount. Of course, you could live longer than the provider anticipated and in that case they will still keep making your regular payments.

The premium you pay may not cover all the costs of your care and additional funds may have to be found from elsewhere.

Another consideration is that the monthly annuity may not keep pace with the rising cost of care and you will have to find any shortfall.

Your income will be increased by the value of the annuity and could affect any means-tested benefits; however, Attendance Allowance, Disability Living Allowance and Registered Nursing Care Contributions are at present unaffected.

Although income payments are not subject to taxation under current legislation, the laws governing taxation are subject to regular review and could change in the future.

If you no longer need care or your health and care needs are fully met by the local authority or NHS, then the payments will continue to be paid, but in this case they will no longer be paid to the care provider and the annuity would convert to a standard annuity (comprising an income and a capital element) and you would be liable for tax on the income element.

The cost of the Immediate Care Plan will reduce your estate for inheritance tax purposes; however, if a payment was made under a capital protection plan, this would inflate your estate for inheritance tax purposes.

Deferred Care Plans are also available but these have no cash value at any time and cannot be cancelled, so are only suitable for people requiring indefinite care. If you die within the deferred period of the Deferred Care Plan you will have no return from your investment.

Once set up you cannot change the terms of your Plan or the capital protection options, even if plan rates improve.

The Next Step

For many, the peace of mind from knowing that their care will always be provided for outweighs the potential pitfalls.

It is always advisable to have help from an independent adviser who can seek out the most competitive rates.

To find out whether an Immediate Care Plan is right for you, and to discuss the options available for you or a loved one in care, talk to Supportive Financial Planning - we will help you.