July 10, 2024
Veronica Mann is qualified as both a chartered and a certified financial planner, making her one of the best-qualified financial planners in the country.
She specialises in planning and advice for later life, which encompasses retirement, care fees and estate planning. Inheritance tax (IHT) can significantly reduce the amount of wealth passed down to heirs but the cost of care fees can potentially decimate an estate. Veronica is particularly interested in helping her clients to have confidence in their ability to fund a comfortable older age including later life care, should they need it. Veronica is an accredited member of the Society of Later Life Advisers (SOLLA), demonstrating her specialist expertise relating to financial advice for later life care.
As Veronica says, “Most of us are familiar with the idea that it’s never too early to start planning for a comfortable retirement and how to minimise the potential inheritance tax burden on their estate. The same applies to paying for care. But many people are unclear about how to do that, what the State will cover, and what other options are available. Many don’t know they are entitled to state benefits which are NOT means tested or know the questions to ask.”
We recently highlighted a 2023 report about the cost of care in the UK. This report highlighted the gap in many people’s understanding and preparedness for later life care – with 94% of all people surveyed saying that they had made no specific provision for covering the costs. With 92% of people over 75 saying the same, it seems the message about tackling this early isn’t getting through, and too many people assume they can rely on the state.
Veronica confirms this. “One of the most frustrating conversations I can have is when an elderly person, or a relative with Power of Attorney, asks me about funding care costs because they are already receiving care and are running out of money. By the time that happens, my ability to help them is severely limited. The time to talk to an IFA is much, much earlier.”
Veronica suggests that clients should consult her as soon as it becomes clear that some additional care is needed. Specific provisions for paying for care are only available once there is an identified need, but acting quickly can keep costs down and help to protect part of your estate for your beneficiaries, if that is important to you.
“An initial consultation with an IFA like me costs you nothing, and could save you a lot of money at a time when your own health concerns and needs should be a priority. It could take a huge weight off the shoulders of a loved one who has the responsibility under the Power of Attorney for you. Making the decision to go into residential care is hard and can be distressing for many people. Knowing that your care costs can be covered without the need to, potentially, sell a family home, is a reassuring position.
“The options for paying for care are fairly limited, but the more time we have, the greater your choices. If you have property, we can look at equity release, drawing down either a lump sum or regular amounts to pay for care. This can affect the state benefits you’re entitled to, so your IFA will make sure you understand the implications before you decide. If you know you need care, you can also ring-fence money to pay for it via an immediate needs annuity. This medically underwritten policy provides for the cost of your care, and is based on your specific health and needs.”
There are only a handful of companies in the UK who offer these annuities, so it’s important to talk to an IFA like Veronica who has full market access and can find the most appropriate option for you.
How does an immediate needs annuity work?
An immediate needs annuity (also known as an immediate care plan or immediate needs care fee payment plan) is specifically designed to cover a shortfall between your income (your pension or any other income you receive) and the cost of your care. It will pay out for the rest of your life. You buy the annuity but, unlike your pension, the annuity income is paid directly to your care provider, meaning you don’t pay tax on it. This makes it very tax- and cost-effective.
How much does an immediate needs annuity cost?
That will depend on several factors – your age, health and life expectancy, how much income you need (and whether you want it to increase over time or build in any additional premium protection).
Your IFA will help you to calculate the shortfall between your income and the cost of care, and how that might change in the future as your care costs increase.
The advantage is that, once you have your annuity in place, it will continue to pay towards the cost of your care for the rest of your life. So, if your projected life span on entering residential care is another three years, but you defy expectations and are still enjoying life seven years later, you’ve potentially saved yourself a lot of money.
Consider that you can leave your beneficiaries at least £325,000 without incurring IHT, but if you need to use your own funds to pay for care fees, your assets could reduce to £23,250 before the local authority will step in to help.
So an annuity could not only give you peace of mind about the cost of your care, but also preserve at least part of your estate for the next generation (or other beneficiaries), allowing you to relax about money whilst still helping out those close to you. Of course, there are other strategies you can put in place to help mitigate IHT too.
To find out more about retirement planning, IHT mitigation or an immediate needs annuity, and get an indication of what it might cost you, contact Veronica. It’s not the right option for everyone, but as she says, “the important thing is to have the information that allows you to make an informed decision. Whatever decision you make is your choice, but at least you’ll be able to avoid looking back and thinking ‘if only I’d known’”.
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