Long-term care: how to plan for longer life

  • Describe the role of the state in long-term care
  • Explain how to insure for long-term care
  • Identify the key points for advising on long-term care

The rules can be complex, so guidance has evolved to help ensure fairness and consistency in interpreting and applying the policy and legislation.

The NHS is responsible for delivering and funding health care in the UK where the primary care need is a health one.

If this is the case, then the NHS is responsible for providing all of an individual’s assessed needs, including accommodation, and this is usually in a hospital or nursing home setting.  

If a person needs care that is not assessed as being primarily a healthcare need, they may still be eligible for a contribution from the NHS towards the nursing care element. 

Care policies 

Pure pre-funded policies, which were developed to meet the increasing number of clients who might need long-term care, are no longer available.

High and increasing premiums along with people's concerns about taking out a policy they may never benefit from meant low demand for the products, which were eventually withdrawn.

Some clients may still have a policy or other forms of protection policies that provide some benefit in the event of needing long-term care. Advisers therefore do still need to fully understand how these work. 

Most clients will use their income and assets to pay for care and, with advice, may also consider an immediate needs annuity at their point of needing care, to insure against living 'too long'. Therefore, building up enough income and assets to cover the risk in retirement is essential.

Immediate needs annuities need to be an advised sale

Immediate needs annuities are not always easily understood, as they are often bought at a time of crisis when simply solving the immediate problem may understandably be the focus.

However, good advice will ensure that the benefits as well as the disadvantages (such as potential loss to the client’s estate of a lump sum) are clearly understood .

They are usually sold to the person’s attorney, who due to their fiduciary obligations must ensure that they fully understand the implications of the purchase.

They are a guaranteed way to cap the cost of care and can be index-linked or escalated at a specific rate to take into account future rising costs.

Even with the latest government social care funding proposals, immediate needs annuities still have a place when advising on planning, to mitigate potential significant loss through the impact of long-term care costs. 

Other additional options can usually be selected, for instance, capital protection or the use of a deferred option. These are all part of the tool kit available to advisers to offer some insurance against the risk of 'earlier death’ before the perceived value of the annuity is achieved.