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

Immediate need care fee payment plans are designed to cover the shortfall between your parent’s income and their care costs for the rest of their life. The price of a plan is based on how much income you need and the insurance company’s assessment of how long they are likely to need it for

Provided the income from the plan is paid directly to the care provider, it’s tax free

How much your parent will pay up front will depend on:

• the level of income they need
• their age
• the state of their health (the poorer their health when they buy the product, the cheaper it will be)
• current annuity rates, and
• their life expectancy (the shorter that is, the cheaper it will be)

If you’re worried about the effect of inflation, it can be built into the plan

For an extra cost you can also put in a special clause – known as ‘capital protection’ – that allows your family to get some of the lump sum payment back in the event of your early death

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

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

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

• your parent doesn’t need to pay for care immediately
• your parent thinks they may only need care temporarily
• your parent might want their money back in the future, or
• there’s a good chance that they would be entitled to NHS Continuing Care funding

Risks

Once your parent has taken out an immediate need care fee payment plan, there’s no going back. So they are not able to cancel the plan and get some of the money back if, for instance, they stopped needing care. Similarly, if they died early, there would be no way of reclaiming any of the upfront lump sum, unless they had made special provision for this

In a nutshell, you need to weigh up the peace of mind your parent would get from having a regular, secure income to pay for care against the possible loss of capital if they were to die in the short term

Make sure you seek independent advice from a specialist-care-fees adviser before buying an immediate need care fee payment plan

Next steps

An immediate need care fee payment plan is only one of the ways to help self-finance long-term care. To explore all the options and discuss which one’s best for your parent, speak to an independent financial adviser

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

This article is provided by the Money Advice Service.