Through a partnership with Eldercare Solutions, the Long Term Care Annuity is a long term care insurance policy underwritten by National Friendly. In exchange for a single lump sum upfront, the plan pays a monthly income towards the customer’s care fees for the rest of their life.
The cost will depend on the income they want to get each month (usually, the difference between the cost of care and the customer’s income from all sources, including pensions, savings and State benefits), their age, state of health and life expectancy. If paid direct to the care provider, benefits are tax free.
The Long Term Care Annuity provides:
• A monthly income paid towards care fees, guaranteed until death.
• Some control over the total amount customers pay for their care, and they can use the annuity as a bargaining tool in some cases.
• The option to defer care payments for one or two years to reduce the lump sum needed.
• 100% protection of capital in month one, with the option to protect part of the capital in months two to six if the customer dies in this period.
• The option to increase the amount paid out each year.
• Optionally, the annuity can go up each year to help cover future fee increases.
There is no refund after the first 30 days, unless additional capital protection is added, therefore one risk is that money could be lost if care doesn’t last as long as expected.
Comment: In recent years there have been just two providers of long term care annuities in the market, so the addition of a third is very welcome.
Such products suit situations where the person in care (or expected to need care soon) has a lump sum available and is looking to crystallise their care costs. They can even help negotiate a good deal with some care homes, as the income is assured.
This plan is available through Eldercare, so that will restrict adviser involvement if that is the only route. That said, for many advisers passing on such clients to an LTC specialist will make sense.
Plus points: A third LTC annuity provider; Some capital protection available; Guaranteed lifetime income; Simple; Tax free benefits in most cases.
Not so plus points: No 100% long term capital protection available; Not every adviser will want to go through Eldercare.
Rating (max 10): Overall: 8. Gold
Tags: Later life; National Friendly