U.K.: One Million People Will Be In Care Homes By 2050 - What Price Peace Of Mind?

Helen Pridham says that an annuity scheme removes anxiety over care home fees later in life LONDON, England (The Times), February 16, 2008: An increasing number of families will have elderly relatives who need to move into care homes over the next decade. There are currently about 420,000 older and physically disabled people living in UK care homes. In ten years the number is expected to have risen to 444,000, according to Laing & Buisson, the healthcare data company. The Joseph Rowntree Foundation, meanwhile, has predicted that 1.1 million people will be in care homes by the middle of the century. There are many factors to take into account when someone needs professional care. The most important is finding the right care home. But not far behind is the question of how to pay the fees. These average £627 a week for nursing homes but can top £1,000 a week in London and the South East. Anyone who has more than £21,500 of capital will have to pay most of the cost themselves, though an attendance allowance and a contribution towards nursing costs will be paid by the State. Care fees are often funded from the sale of the person’s property. It is estimated that 70,000 properties a year are sold for this purpose. Relatives typically deposit this money in a building society account and cross their fingers that it will last long enough. However, there is one way to guarantee that it never runs out. An immediate-needs annuity will pay all or part of the fees until the person in care dies. The cost of the annuity will depend on the person’s state of health and potential life expectancy. Many people are unaware of these plans. Philip Spiers, of NHFA Care Fees Advice, says: “It is estimated that fewer than 5 per cent of families with relatives entering care each year consider this option or take any financial advice at all.” Janet Davies, founder of Symponia, the care fees specialist, believes that care homes should ensure that families have access to independent advice. She says: “I am amazed at the arrogance of some home providers. They are prepared to take someone’s life savings, yet they do not want to talk to families about money. They have a duty of care towards residents but they are not helping families to avoid financial worries about the future.” Immediate-needs plans are not the answer for everyone. It is usually advisable to wait about six months before making any decisions because the shock of moving into a home can be too much for some elderly people and they may survive for only a short period. Some families feel that the cost is too great. Ms Davies says: “The average cost of an immediate-needs annuity is about £80,000, which is a lot of money for most people. Few of us will have ever written a cheque of anywhere near this size, so it is not an easy decision to make.” Naturally, there is a risk involved. If the person dies sooner than expected, the family will have paid out more than was necessary. But if he or she lives longer, there can be a considerable saving. Owain Wright, head of care funding services for Saga, says: “Some people are reluctant to part with the money because they feel that they are giving away their inheritance, but in a few years they may have spent it anyway. The advantage of an annuity is that it takes away the blank-cheque aspect of paying for a care home. It limits your liability.” Mr Spiers adds: “You have to weigh the sacrifice of capital against the peace of mind. Otherwise, relatives have to consider what will happen if the money runs out. Some councils may not be prepared to pay a particular home’s fees and the person in care could be evicted.” He argues that another advantage of an immediate-needs plan is that any remaining capital can be invested for the longer term, allowing it to grow and possibly make up for the money spent on the annuity. Families that consider annuities will have the choice of fixed or increasing payments. This decision will be influenced by how old the person is and how much spare capital will be available after the annuity has been purchased. Ms Davies says: “Fees do rise every year, so if it is a ‘younger’ person – under 89, for instance – then an escalating annuity may be the best choice.” Another option that can reduce the cost is a deferred annuity. The family pays the fees for the first two years and then the insurer takes over. Capital-protected annuities are also available. These pay back half the capital on death, less fees already paid, but the initial cost of these products is higher An independent adviser is essential when considering an immediate-needs plan. The adviser will obtain quotes from all three insurers in this field: Partnership Assurance, PPP and Tomorrow. The figures can be very different. Mr Wright says that one of his clients, an 87-year-old woman who had suffered a stroke and had mild dementia, was quoted lump sums of between £42,000 and £144,000 for fees of £17,000. He adds: “What this shows is that even the insurers cannot predict someone’s longevity accurately, so how can families know for how long they will need to pay fees?” CASE STUDY NEEDS MUST TONY AND RUTH TAYLOR of Pinner, northwest London, recently purchased an immediate- needs plan for Ruth’s 90-year-old mother, Ella. “My mother needed to go into a care home after she fell and broke her hip,” Mrs Taylor says. “She became very confused after that and unable to cope on her own. It meant selling her flat to pay the fees, which are £650 a week, but we were concerned about what would happen if the money ran out.” Mrs Taylor approached Symponia, the care fees specialist, which recommended an immediate-needs plan for a little more than £70,000. The plan pays out £1,400 a month and the Taylors make up the rest from Ella’s pensions and attendance allowance. Mrs Taylor says: “We realise it is a bit of a gamble. Mother could die within a couple of years, but she is physically quite fit and could live another ten years. So it was worth it for the peace of mind.” © Copyright 2008 Times Newspapers Ltd.