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Care Fee Annuities

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Care Fee Annuities – the guaranteed and secure way to pay for care.

Care fee annuities, also called immediate need annuities or even care home annuities, provide a very safe and tax-efficient way for people paying for care to ensure money will never become exhausted and they can continue to receive their chosen care for the rest of their life.

They do this because in return for paying one single premium they provide either a level or escalating additional income for the rest of the person’s life, whether they need care at home or in a care home.

Care fee annuities are portable, so even if you buy one to provide for care at home, if you later need to move into care, the income can be paid to any new provider.

Who Should Consider A Care Fees Annuity?

Only those who need to currently fund their own care either at home or in a care home and are unlikely to qualify for either Local Authority funding or NHS Continuing Healthcare, should consider a care fees annuity.

Anyone in this situation may like to consider an annuity if they would like to ensure they can continue to receiving their care without worrying that their money may not last.

Even if there is no danger that money will become exhausted, families often use them to cap the eventual lifetime cost of care to help ringfence any remaining money is protected for beneficiaries.

As a care fees annuities have to be purchased with one single premium, they are also popular with families where their parent or relative is liable for inheritance tax as apart from helping pay for their parent or relative’s care, the premium once paid, immediately reduces their estate and helps to either reduce or even avoid any future IHT liability.

Care fee annuities can be purchased at anytime once care is required, not just before entering care and the premium can even be paid by family if required.

The Benefits of Care Fee Annuities

The real beauty of them is their simplicity and also the peace of mind they provide that money will never run out.

The income paid by any care fees annuity is also currently tax-free providing it is paid to any Care Quality Commission approved care provider, even if the premium has been paid by family, but remember tax rules may be liable to change.

A care fees annuity is also very secure as they are fully covered by the Financial Services Compensation Scheme with no upper limit, so you would be protected, should an provider collapse.

How Do Care Annuities or Care Fee Plans work?

Care Fee Annuities can only be purchased by people who are over 60 and only when they need care (hence they are also described as Immediate Needs Annuities).

They can be purchased by either the person needing care themselves, or by any Power of Attorney they may have appointed.

The income they provide can either commence immediately or you can elect to have it commence only after an agreed period (usually 1-4 years) to get a cheaper premium. Annuities which commence only at a later date are called Deferred annuities.

In return for paying this premium a care fees annuity can provide you with:-

  • A TAX FREE income* which is paid for life. 
  • An income which can be paid either monthly, quarterly or annually and can for an extra premium be set up to increase each year by any requested amount.
  • Peace of Mind that money should never run out and that any remaining capital is protected for future inheritances.
  • Simplicity of tax matters - as the income a care annuity provides never needs to be declared unless they are paid into your own bank account rather than to a registered care provider.

*The income paid by care annuities is currently only tax free providing it is paid to a registered care provider or home and the benefits requested are not greater than the cost of care. Please be aware tax rules are also liable to change. 

What are the risks of buying an annuity?

Whilst care fee annuities have no investment risk as the premiums are calculated based on how long any provider feels they may need to pay, they do carry the risk that should you die prematurely you will receive no refund. This can to some extent be insured against by paying a little more and opting to provide some capital protection.  You can read more about capital protected care fee annuities below.

Capital Protection - Offering you money back even on death

To help overcome some of the risk of dying shortly after buying an annuity, it is reassuring to know that currently three providers include free of charge, some limited and decreasing 6 months premium protection and one of them is currently extending this to 12 months if death is caused by Covid.

With all providers you can also opt to pay a little more to buy longer-term capital protection to ensure either 25%, 50% or 75% of the premium will be paid out by date of death and if not any balance of the amount protected will be refunded to the estate.

Just how much extra this will add will depend on how large an annuity you want, whether you also want the income to escalate and of course how much protection you want. If you ask us to obtain quotes, we will always obtain quotes both with and without capital protection so you can see just how much it would add, so why not find out now.

How much do care fee annuities cost?

Care fee annuities are individually priced based on both the amount of income requested, the options selected (whether you want the income to escalate and/or want some capital protection) and how long the insurer feels they will need to continue paying for.

Premiums reflect the individual’s age, medical history and need for care. Therefore, it is impossible to give any meaningful figures here, but being specialist care fee annuity brokers, we will be pleased to obtain the very best quotes for you from ALL care fee annuity providers, free of charge and without any obligation. 

Allow us to search the entire market for you.

Or speak to an expert now – Call free on 0800 180 4336

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Please note: These plans are not offered direct by the insurers

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267 Barrowby Road, Grantham, Lincolnshire, NG31 8NR

Telephone: 0800 180 4336



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