Morfitt's Mailshot Issue 40...          Can't see this email properly? View in browser

Morfitt & Turnbull

Issue 40   

Time marches on......

I’ve decided to write about a very topical issue for this Newsletter, Long Term Care and some statistics surrounding it.

From an Age UK report published in October 2016.

Two in five (41%) now pay the full cost of their care.

Self funders now pay on average between £603 and £827 per week dependent upon location, however, many pay over £1,000 per week. Council funded clients pay between £421 and £624 per week. Therefore self funders are ultimately paying for a system under severe pressure, through this cross subsidy.

There are around 433,000 people in residential care.
  Thiinking about getting old
It is estimated that around 53,500 self funders enter a care home each year, but only around 7% of these people obtain terms for an Immediate Care Plan.

In 2016 there were 11.6 million over 65’s in the UK in the next 17 years there will be 16 million. There were also 2.5 million over 85’s, in the next 23 years there will be 3.4 million. Over 85’s are the fastest growing cohort. There were also 34,450 people over age 100. 1 in 5 people will now live to at least 100.

Average life expectancy for Women aged 85 is 7.6 years and 3.3 years for a 95 year old.

Those from more affluent backgrounds tend to live longer than those from poorer backgrounds, so self funders also tend to live longer than Local Authority funded people.

The social care funding problems have been around since 1997 when a Royal Commission was undertaken.

There are over a 100 types of known Dementia, 60% of diagnosed cases are Alzheimer’s disease. There are currently 850,000 Dementia sufferers in the UK this is set to rise to 1.5 million by 2025.

  Worrying about getting old
1 in 14 people currently aged below 65 are likely to develop Dementia, whilst 1 in 8 people over 80 will be diagnosed with Dementia.

According to the Office for National Statistics spending patterns change as we go through retirement. For those aged 50-64 it averages at £29,744 p.a., between ages 65-74 it falls to £23,816 and drops to £15,496 for over 75’s.

There is a very real risk that self funders will eventually run out of money due to longevity and this could mean moving care homes for the resident as local authority rates are normally much lower than the private rates that are paid. This can be avoided by an Immediate Care Plan which Adam will provide further detail on below.

If you or your family need any assistance in this complex area of financial planning please contact us and we will be more than happy to assist you.


Adam's Technical - Guaranteed income to pay for care
Following Craig’s piece, I thought it worthwhile highlighting the option of investing into a plan referred to as an Immediate Care Plan or Immediate Needs Annuity. This type of plan works by investing a one off lump sum when entering long term care in return for a guaranteed income for life.

It works by calculating an individual’s guaranteed income from all sources then deducting this amount from the cost of care to arrive at an income shortfall figure. A health questionnaire is then completed which is sent to the product providers asking them how much capital is required to meet this income shortfall. The provider requiring the smallest lump sum can then be chosen and the monies invested in the plan which will pay an income until the individual passes away.

  Guaranteed income to pay for care
A few points to note:
  The income is paid directly to the nursing home and is normally tax-free provided they are a registered care provider.
  The plan can be set-up so that the income increases each year by a fixed amount or in-line with the Retail Prices Index. This can offset part or all of the fee increases the care home announces in the future.
  Once the capital is invested in the plan it is removed from the estate for Inheritance Tax purposes.
  A set amount of income could be chosen to meet part of the shortfall.
  The income is guaranteed to be paid until the person receiving care passes away. There is no investment risk and no risk of the capital running out.
  The Annuity will have no value after death.
If you have any queries, please contact your Morfitt & Turnbull adviser on 01565 624370.

Gareth Says... 

No quick fix
There is no quick fix to Long Term care funding. One relatively interesting point is that Investment Bonds are currently exempt from the means test calculation carried out by by local authorities to assess whether they will assist in the funding of care. Although investing in this way purely to avoid paying for your own care is not allowed.
We also have lower risk investment bonds that we use successfully to assist in funding the “gap” between the care fees and income. Money

Staff Matters

Craig has now become a full member of the Society of Later Life Advisers (SOLLA) after being awarded the Later Life Adviser Accreditation which was a fairly arduous task! The aim of SOLLA is to raise the standards of practice of those engaged in advising older clients by promoting the highest levels of professionalism in financial advice, by accrediting only specialists in this field who must follow a strict code of conduct.
By way of example, within 25 miles of Knutsford there are only 22 SOLLA representatives – well done Craig!


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