Immediate need care fee payment plans

If you need a regular income now to pay for care either at home or in a care home, an immediate need care fee payment plan could be worth looking at. This income is tax free if it is paid directly to the care provider.

What are immediate need care fee payment plans?

These plans are a type of annuity contract.

An annuity is a type of insurance policy that provides a regular income in exchange for an upfront lump sum investment.

When they are used for long-term care they provide a guaranteed income for life to pay for care costs.

They can be known as:

  • immediate need care fee payment plans
  • immediate care plans
  • immediate needs annuities

How immediate need care fee payment plans work

Did you know?

The average cost of an immediate need care fee payment plan is £69,000.

Source: PSSRU, Immediate Needs Annuities in England, Jan 2011

Immediate need care fee payment plans are designed to cover the shortfall between your income and the costs of your care for the rest of your life.

The price of a plan is based on how much income you need and the insurance company’s assessment of how long you’re likely to need it for.

How much you pay upfront will depend on:

  • the level of income you need
  • your age
  • the state of your health (the poorer your health when you buy the plan, the cheaper it will be)
  • current annuity rates
  • your life expectancy (the shorter that is, the cheaper the plan will be)

The income from the plan is tax free if it is paid directly to the care provider.

If you’re worried about future fee price increases, you can build the cost of covering them into your care plan.

For an extra cost you can also put in a special clause (known as capital protection). This allows your family to get some of the lump sum payment back if you were to die early.

Some insurance companies offer a “deferred” option in their plans. This option allows you to choose to defer receiving income from the plan until a later date. The longer the deferred period, the lower the cost of the plan. If you are considering a plan, check to see if this option is offered so you can compare costs.

Immediate need care fee payment plans could be suitable for you if:

  • you’re already in a care home, you’re about to move into one, or you’re receiving care at home
  • you want the peace of mind of knowing that you have a regular income for life that can be used towards your care costs, whatever happens
  • you have the money available to invest
  • you want to cap the cost of your care, potentially safeguarding your remaining capital

Immediate need care fee payment plans are NOT for you if:

  • you don’t need to pay for care immediately
  • you think you may only need care temporarily
  • you might want your money back in the future
  • there’s a good chance that you would be entitled to NHS Continuing Care funding

Risks

Once you’ve taken out an immediate need care fee payment plan, there’s no going back.

You won’t be able to cancel the plan and get some of the money back if, for example, you stop needing care.

You also need to weigh up having a regular, secure income to pay for care against losing the lump sum you’ve invested if you were to die early.

Next steps

An immediate needs care payment plan is only one way to pay for long-term care.

Make sure you seek independent advice from a specialist care fees adviser and look at what else is available before buying one.

Find out more about ways to self-fund your long-term care.

Use the Money Advice Service Retirement Adviser Directory to find a specialist care fees adviser in your area.

You can also search for a specialist care fees adviser on the Society of Later Life Advisers website.