Partnership Care Plan Payment Option
Partnership’s Care Plan Payment Option (CPPO) is a fixed rate loan that enables people to fund their long term care, without having to sell their family home.
The loan has a fixed rate of 6.99% and is secured against the family home. The mortgage loan is then used to purchase a Partnership Care Plan, which is a single premium plan that provides a guaranteed income for life. If those payments are made direct to a registered care provider, the income is tax free. The CPPO can be for a lesser amount, e.g. if the customer wants to use some of their realisable capital to help fund their care.
All interest is rolled up during the customer’s lifetime and the loan and interest is usually repayable on death or on the earlier sale of the home. However, the customer can repay part (minimum £5,000) or all of the CPPO at any time, without penalty.
Partnership offers a no negative equity guarantee so that the CPPO and accumulated compound interest will never be greater than the proceeds of selling the home.
If death occurs within six months of taking out the Care Plan, there is effectively a money back guarantee.
One benefit of the scheme is that, after the mortgage is completed (where there must be vacant possession), the customer can rent out their home or allow a relative to stay there (subject to Partnership’s agreement). That also allows the customer to return home should they wish to do so later.
Plus points: Helps pay for a single premium care plan, without selling the family home; That may be attractive where say a spouse still lives there or where the elderly person does not want to relinquish their home when they have to go into care; In practice, few will then return home, but the psychological benefit of that option may be important to them; Or, they may choose to rent out the home (or allow a relative to stay there), so generating additional income.
Not so plus points: 6.99% may look expensive for a fixed rate loan in the current market, but most ‘general’ fixed rate mortgages are for fixed terms (1-5 years is common), may have early redemption penalties and require interest to be paid monthly; That said, one downside of this arrangement is that interest can quickly build up—the capital sum borrowed will almost double over ten years (although many people going into residential care will not live that long); This is a specialised and complex area and few IFAs specialise in it; Customers should always take independent legal advice before embarking on such arrangements; There may be better options available; Not every property is suitable for this arrangement (or for renting at an attractive rate and renting also gives rise to other costs).
Website: http://www.partnership.co.uk.
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