Long term care costs
The cost of long term care will depend on the health of the
individual. Where the individual only needs companionship
as well as help with the daily activities of life such as
22washing, feeding and dressing, this is provided by a residential
care home. Where the individual suffers from a medical condition
that requires the attention of a nurse, this is provided by
a nursing home. An individual may be entitled to state benefits
funding for long
term care, even if they pay their own nursing home costs.
Residential care may cost an average from £13,400 to
£16,400 depending on the location in the UK, whereas
nursing care could cost an average from £16,700 to £24,400
depending on the location in the UK. This means that if the
estate is large, a significant amount of its value could be
used on long
term care if the elderly relative lives considerably longer
than expected and very little eventually left to the beneficiaries,
such as children or grandchildren. The following is a breakdown
of average costs in different parts of the UK.
Long Term Care Costs
Example - Shows the approximate
annual cost of residential care and nursing home
care for different regions of the UK.
The cost of long term care can be capped or limited to a
know amount by using an immediate needs annuity. This would
protect the estate from capital erosion in the event of the
individual living significantly beyond their life expectancy.
Immediate needs annuity
An immediate needs annuity policy can be purchased where an
elderly relative is already in either residential care or
a nursing care home or is about to be admitted. The annuity
is paid directly to the care provider for the live of the
individual and the Inland Revenue has agreed for this to be
paid gross (no tax on the income). An alternative to an immediate
needs annuity is a purchased
life annuity where the income is paid to the individual
and is partially taxed. This is more suitable for people that
are in good health and living in their own homes and are looking
for a higher guaranteed rate of return from their capital
than bank interest to supplement their income.
The Inland Revenue have stated that the amount payable by
the annuity can only be equal to or less than the actual charge
made by the care home, there cannot be a surplus to the estate,
should there be a reduction in the home care fees charged
or in the unlikely event the individual returns to their home
to look after themselves.
The usual method of purchase is a single lump sum payment
in exchange for an income to cover all or part of the costs
of long term care for the life of the individual. It is also
possible to have different options depending on the circumstances
and assets where the immediate needs annuity can be deferred.
Other features that can be added to the annuity are escalation
rates and capital protection. Escalation attached to an annuity
means the income paid to the care home rises by a fixed percentage
each year and protects the income against inflation. Rates
can be chosen between 1% and 5% of escalation. Capital protection
allows the original capital to be protected in the event of
the early death of the individual. The percentage of capital
to be protected, up to usually 75%, would be returned to the
estate less all income paid to the care home. This option
would increase the cost capital cost of the immediate needs
annuity rates table
These rates tables are for purchased life annuitants. For
other rates try;
The following immediate needs annuity table shows the capital
required to provide an annual income of £12,000 for
nursing and residential home care on a level basis
for men and women.
It assumes the annuitant in the Nursing Home has suffered a major stroke and is
dependant on all of the activities
of daily living. This higher level of assistance can only
be provided by a nusring home whereas the annuitant in the Residential Home is diagnosed with dementia and this lower level of assistance is dependant
on only some of the activities
of daily living.
Nursing Home - Level Annuity
Residential Home - Level Annuity
The above are examples of the rates available. Click the following for the extended immediate needs annuity tables.
The immediate needs annuities above are based on a specific
medical condition and should be used as a guide only. For an
annuity rate specific to your or a relatives circumstances,
medical conditions and ability to perform activities of daily
living you should complete the immediate
When the annuity is bought the costs of nursing home care
could be paid for immediately for the whole of the life of
the elderly relative or some providers offer the option for
a deferred immediate needs annuity for a period of time between
1 and 5 years, after which the costs of nursing home care
would be paid for the whole of the life of the elderly relative.
The cost difference for the elderly relative's estate of these
two options can be shown in the following table, assuming
the annual cost of long term care is £20,000. It also
assumes the elderly relative is female aged 80 years, has
suffered a stroke and now requires 24 hour care. It is important
to request a quote specific to you or an elderly relatives
medical condition as rates can differ significantly due to
the health and life expectancy of the individual.
Deferred Annuity Options
The family pays a single payment
now of £35,500 and this covers the £20,000
per year cost of nursing home fees escalating at
a 2% fixed rate for the rest of the life of the
The initial single payment for the
family is £8,800. The family pay the nursing
home fees for 2 years, after which the annuity pays
the of nursing home fees escalating at a 2% fixed
rate for the rest of the life of the elderly relative.
Example - Assumes that the annual
cost of nursing home care is £20,000 for a
female aged 80 years who has suffered from a stroke.
Rates differ significantly due to health. For an
accurate quote specific to you or an elderly relatives
medical condition(s) please submit a immediate
Option 2 could cost the estate a maximum of 2 years nursing
home fees (approximately £40,000 for 2 years) plus the
annuity cost of £8,800, or a total £48,800. The
difference between the two options is that for option 1 the
medical prognosis is that the relative is likely to live beyond
2 years, so the family should pay £35,500 now. With
option 2 the medical prognosis is that the relative is expected
to live less than 18 months, so the family should pay £8,800
now and the nursing home fees every month. However, this is
capped at the total cost of £48,800.
Underwriters will use various approaches to underwrite an application for immediate needs cover and this includes their own experience of risks and possibly the Anderton Diagnosis Index. This index considers the medical condition suffered by the applicant as well as their ability to perform certain activities of daily living. The medical conditions most commonly found in applicants is shown in the following table, however, any illness or disease that reduces the life expectancy of the individual would be considered by the underwriters. It is important to request a quote specific to you or an elderly relatives medical condition as rates can differ significantly due to the health and life expectancy of the individual.
An immediate needs annuity is something that allows people to plan with some degree of certainty when they are potentially faced with an open ended amount of care being required. This sort of annuity is suited to just these situations and can certainly provide some peace of mind as well as a degree of certainty regards the financial situation of the applicant. Considering the activities of daily living is one of the ways in which these sorts of annuity can be assessed. Our website details all this, giving you all the information that you may need in order to assess the situation.
Common Medical Conditions
Note - Rates can differ significantly
due to the health of the individual . For an accurate
quote specific to you or an elderly relatives medical
condition(s), please submit a immediate
Activities of daily living
There are a number of activities of daily living that would
be considered by the providers. The more of these that the individual
cannot perform independently, the higher the annuity rate in
general, as follows:
Such as speech, are they easy to understand, difficult
to understand or unintelligible;
Orientation and behaviour
Is the person mentally alert, are they vague with lucid
period or confused and dis-orientated;
Feeding and nutrition
Is the individual able to feed themselves, or do they
need assistance or are unable to feed themselves.
Can they dress themselves or do they need partial or full
Such as moving from bed to chair without, or do they need
some or full assistance;
Can they use the toilet unaided, or do they need some
or full assistance;
Can they walk up and down stairs unaided, or do they need
some help or cannot manage stairs at all;
Is the individual continent, or do they have the occasional
accident or are they incontinent.