Long-term care annuities

The cost of care in later life is something that many people, sadly, leave too late to consider.

Often overlooked at the time of choosing retirement annuities, long-term care annuities are designed for those who require care immediately. This is why they are sometimes referred to as Immediate Needs Annuities or INAs.

Funding long-term care for the elderly

Long-term care annuities offer many retirees peace of mind, knowing that finances are in place before, or as, they need them to guarantee their care as long as they live, without having to sacrifice their assets.

How do long-term care annuities work?

In return for a single premium, a tax-free regular income will be offered to the care provider of your choice.

Long-term care annuities work in a similar way to other types of annuities: you pay a lump sum in return for an income that will pay-out, usually, until the end of your life. But the difference with this type of annuity is that it has tax advantages to help cover the costs of residential homes or even domiciliary care (within your own home), and the income may be paid directly to your care provider.

Immediate needs annuities can be purchased to factor in inflation in the cost of care, so that there are no worries about increasing care costs.

Cost of long-term care annuities

The amount that your care provider receives on your behalf will depend on the initial amount that you are able to pay, as well as other factors relating to the state of your health and your age.

When calculating the cost of the annuity, the provider will also consider the level of funding that is likely to be needed in order to cover your care costs.

Next steps

Planning for long-term care can be complicated, and purchasing an annuity is a big financial decision, so you may want to speak to a financial adviser.

You may also want to consider other types of annuity that are available on the market, and consider alternative to buying an annuity before making a purchase.

Last updated: 17 May 2015