How to make clients think about long-term care

Clients who appear in robust health in their 60s may only be considering making their money work for them as they head off on a cruise and providing for their descendants.

However, it is important to point out the potential need for long-term care and educating them about demographic trends, the costs of private care and the lack of state support, says Brian Fisher, long-term care marketing manager for Aviva.

He explains: “The biggest issue is one of awareness. Research shows consumers are still unclear about the real cost of long-term care and who pays for it, choosing to ignore the problem until it happens.”

Present the statistics

Clients expecting to rely on the National Health Service (NHS) could be in for a shock.

Each client is different but long-term care planning is often an emotive time for the family and it is vital they receive the right level of support and advice. Steve Lowe

Regardless of the fact the government has delayed the care cap until 2020, and expects individuals to shell out £72,000 before the cap kicks in, the NHS and supporting state-funded care services have been seeing spending cuts for many years.

Local authority funded social care isn’t getting the funding it needs from centralised government and, as a consequence, many people are not getting the help they need.

Part of the educational process, therefore, is to present these statistics as baldly as possible.

More of us are living longer than previous generations but the likelihood is many of these years will be spent in poor and declining health.

When it comes to ill-health, although some conditions can be managed well with medical treatment, others cannot, and many clients will have to face the fact care is needed, it will cost, and the government cannot fund everyone.

AgeUK’s 2016 wide-ranging study on Later Life in the UK has revealed are 2.8m older people with care-related needs in the UK, but nearly one million of these people receive no formal support at all, largely because of cuts to state funding.

■ The combined care market value for care for older people, including local authority funded, voluntary and private expenditure, is estimated to be worth £22.2bn, of which £13.4bn is attributable to residential care and £8.8bn to non-residential care.

■ Approximately 30 per cent of people use some form of local authority funded social care in the last year of life.

■ In real terms, spending on social care in England has fallen by £770m since 2010.

■ In England, 371,770 people aged 65 plus received community-based care and support at home in 2013 to 2014.

■ During this same timeframe, 44,015 older people received day care and 22,615 received meals. This was half of the number receiving these the previous year - a significant problem in itself.

■ Only 8,840 received needed short-term residential care (non-respite) in 2013-2014.

■ Of the 2.8m people aged 65 to 89 in England, 900,000 currently do not receive any formal support.

These wake-up calls need to be given early and urgently, according to Janet Davies, co-founder of Symponia.

She says: “Only when all advisers start to include the funding of care in their mainstream pre and post-retirement and later-life planning exercises will it ever be taken seriously.”

Consider some alternatives

There are some insurance products that may be beneficial for clients who are not eligible for an immediate needs annuity, which may not be as comprehensive but still offer help to meet the care bills.

A deferred care plan is one. Again, a deferred care plan is not offered widely by insurers but it can provide an income which has been pre-determined to start at a specific point in the future, normally between one and five years.

As there is a deferred period before income is paid, generally such plans have a lower premium than an immediate needs annuity, but any care costs that may be incurred until the plan kicks in will have to be met either by the NHS or local authority, or by the individual themselves.

Joanna Fowler, head of product for Saga Personal Finance, says: “The product which most closely aligns to pre-funding is the currently available whole-of-life policy, which can trigger an early benefit payment if the activities of daily living (walking up stairs, boiling a kettle, for example) are unable to be carried out by the policy holder.”

In addition to whole-of-life policies, some clients may wish to consider putting some assets into trust and implementing estate planning exercises as a way of shoring up a reserve while mitigating the effect of inheritance tax should they die before they require the use of the funds for long-term care.

At the point of needing care

Clients at the point of needing care, whether residential or nursing, or in their own homes, will require specialist advice from their financial adviser.

Janet Davies, co-founder of Symponia, says: “Sometimes age, deteriorating health and a loss of mental capacity brings added complexity.

“The key is to understand who the client is and how to interact with them in the short and longer-term. If advisers believe mental capacity is failing, they should refer to the client’s GP and /or to a private client solicitor specialising in the needs of the elderly.”

Issues such as power of attorney, wills, estate planning, tax and benefits all need to be considered.

Most advisers working in the later life areas should have a discussion on power of attorney and wills as part of their usual client fact-find Joanna Fowler

Steve Lowe, group communications director for Just Retirement, explains: “Each client is different but long-term care planning is often an emotive time for the family and it is vital they receive the right level of support and advice.

“Intermediaries operating in this area need a good working knowledge of not only finance but also benefits entitlements, tax implications and legal requirements. It is arguably one of the most diverse areas on which to advise.”

According to Aviva’s Mr Fisher, needing power of attorney is possibly the only “real legal issue” with which advisers might have to contend in the majority of cases.

He explains: “The issue is the majority of immediate needs annuity applicants have dementia as a significant condition, and often lack the mental capacity to sign a contract.

“Consequently, most applications are completed by attorneys (enduring or lasting), deputies, trustees or family members. Financial advisers therefore need to have a detailed understanding of the substituted decision-making process.”

Importantly, Ms Davies adds advisers should “only act upon sight of the original or the legally certified copy”.

Ms Fowler adds: “Advisers already have to assess a client’s capacity to make their own decisions as part of the process.

“Most advisers working in the later life areas should have a discussion on power of attorney and wills as part of their usual client fact-find. Even if the necessity for a power of attorney has not already arisen, it may well do in the future.

“Including these questions in the fact-find process will ensure the adviser is well prepared before making any recommendations.”

Professional partnerships

There are several organisations which provide up-to-date information, training and support for advisers doing long-term care planning, such as the Society of Later Life Advisers and Symponia.

Also, generating and maintaining good professional partnerships with local legal and accountancy practices can prove vital for those firms which do not have in-house legal or tax expertise.