Immediate Needs Annuities – What You Should Know

Written by Karen Bryan

care homeMany of us, as we approach later life will need to call on specialist care in order to get us through. While the NHS and local authorities can do wonders for those on low incomes, the service provided by funded care services can be unparalleled, and getting the best care for your money can be essential for your health and well-being.

An immediate needs annuity is one way of ensuring that you or a loved one gets the care they deserve, as opposed to just a basic service offered by a local authority. While plans can only be purchased for an individual, they can be purchased by a third-party, so should a loved not have the funds to afford care you are able to fund this for them.

How Does an Immediate Needs Annuity Work?

Just like a pension annuity, that pays you a regular income from your pension funds value for life, an immediate needs annuity allows you to pay for regular care for an upfront cash sum.

How much your annuity costs will depend on a number of factors:

  • The income you need – this will be based on your current assets for means-testing reasons
  • Your age – the longer you need to receive an annuity, the more you have to pay or the smaller the regular payments
  • The state of your health – just as with an impaired health annuity, the more unhealthy you are deemed, the less you will be required to pay
  • Your life expectancy – as above, the longer you are expected to live, the more you are expected to contribute to receive the required levels of income
  • Current annuity rates – annuity rates can fluctuate

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

Is an Immediate Needs Annuity Necessary for Me?

That will depend on your current circumstances.

You may require an immediate needs annuity if:

  • You are living in a care home.
  • You are about to move into a care home.
  • You are receiving domiciliary health care.
  • You want to know your care bills are covered for life.
  • You can afford it.
  • You want to cap the cost of care for security and to avoid price hikes.

It is not likely you will find an immediate need annuity necessary if:

  • You do not need to pay for care.
  • Any care you are receiving/expect to receive is only temporary.
  • You don’t want to be locked into the annuity.
  • You are entitled to NHS Continuing Care funding.

Things to Remember

An annuity is more often than not a contract for life. If you do not need care any longer, than you cannot cancel the contract and receive a lump sum back. Likewise, should you pass away earlier than expected then your family or beneficiaries cannot benefit from a return on the investment or payments redirected to them.

While the security for many is often crucial, you need to ensure that you will take full advantage of it and are happy to take the risk on the investment. An independent financial advisor will be able to assist you, to see if you are making the right decision.