Best to prepare for long-term care

The average weekly cost of a room in a residential home in the UK is £600 and a room in a nursing home costs on average £841

ONE of the potential challenges of later life is the possibility that, one day, our health may not be what it is today.

In fact, we have to consider the real possibility that we may require long term residential or even nursing care.

While we are all familiar with the notion of long term care, many of us might be surprised at how expensive it can be.

The numbers, when you look at them, will certainly be something of a wake-up call for many.

In 2016-17, the average weekly cost of a room in a residential home in the UK was £600, and a room in a nursing home cost £841.

However, these are only average figures, and in fact annual fees in some areas can be as high as £45,000 a year.

With increasing longevity and life expectancy, the possibility that we may one day have to find funding to care for ourselves has never been greater.

Today, if you reach 65, you can expect to live until you are over 83 for a man, and as a woman you can expect to live until you are nearly 86.

And if you reach 85, as a man you can expect to last until you are nearly 90, and over 91 if you are a woman, according to the Office for National Statistics.

It is estimated that one in three women and one in five men will need residential care at some stage of later life.

If you fall into ill health and relatives are unable to care for you themselves, then long term care could become an inevitable option.

Given that two in five care home places in the UK are paid for by the residents themselves, the financial challenges of long term care are clearly considerable.

Many people who are unprepared for these costs find themselves forced to consider equity release on their home, which has an obvious and undesirable effect of reducing the value of your estate.

A more suitable option could be an immediate needs annuity. This is an annuity that is taken out when it becomes apparent that long term care will be needed, and can be an effective way to offset much of the cost.

The immediate needs annuity provides regular ongoing payments to cover the cost of your or a relative's residential care.

The annuity can only be purchased once the decision to enter long term care has been made, because the current cost of care at that time will dictate the cost of the product.

Like many products of this kind, the immediate needs annuity is an irreversible purchase, which provides peace of mind in return for a once-off lump sum payment.

With a quarter of us likely to have need of care at some stage, perhaps not simply residential care but much more expensive nursing care, taking financial advice to plan ahead could be time well spent.

:: Michael Kennedy is an independent financial adviser and pensions specialist, and can be contacted on 028 71886005 . Further information is available on the Facebook page 'Kennedy Independent Financial Advice Ltd'

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