topics this page:   • long term care costs • annuity rates     • immediate needs policies • medical conditions     • activities of daily living • deferred annuity

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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 washing, 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 or NHS 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.

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 policies
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.

Annuity rates
These rates tables are for immediate needs annuitants for both nusring home and residential home capital costs. For other rates try;
standard rates
smoker rates
diabetes rates
impaired rates
with profits rates
purchased life rates


NURSING HOME - £12,000 pa income

The following immediate needs annuity table shows the capital required to provide an annual income of £12,000 for nursing home care, either on a level or 5% escalation basis for men and women.

It assumes the annuitant 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.

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 ralatives circumstances, medical conditions and ability to perform activities of daily living you should complete the immediate needs quote.


Deferred annuity
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.

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.


Medical conditions
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.

•	Communications 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.
•	Dressing Can they dress themselves or do they need partial or full assistance;
•	Transfer Such as moving from bed to chair without, or do they need some or full assistance;
•	Toilet use Can they use the toilet unaided, or do they need some or full assistance;
•	Stairs Can they walk up and down stairs unaided, or do they need some help or cannot manage stairs at all;
•	Continence Is the individual continent, or do they have the occasional accident or are they incontinent.   Bookmark with: What are these?