How it works
Instead of paying an income to you, a Long Term Care Annuity (sometimes called an Immediate Care Plan) regularly gives money to a registered care provider on your behalf. Payments continue for the rest of your life, to help cover the cost of your care.
These annuities are usually bought by people who need to pay for care immediately, and for an indefinite amount of time. But some providers will let you defer the payments, so you know you’ll be able to pay for care when you need it. As a general rule, the longer you defer your payments, the lower your premiums will be. Like other annuities, Long Term Care policies can be level or escalating.
Long Term Care Annuity are currently tax-free, unlike traditional annuities where the income you receive is taxable. However, if you leave care, your annuity will be paid directly to you and then becomes taxable.
What’s the catch?
A Long Term Care Annuity isn’t guaranteed to cover the full cost of your care. If your initial policy isn’t worth enough to cover the whole cost, or if the cost of care rises at any point, you’ll have to make up the difference. Your policy could also prevent you from receiving some state benefits.
As with a traditional annuity, you could be vulnerable to inflation rises, unless you choose an increasing annuity, and if you die early in the plan, your family probably won’t see a return on your investment.
Long Term Care Annuities can be a little more complicated than other annuity options. To ensure you’re making the right decision and getting the best value, it’s worth talking to a specialist so you understand all your retirement options. We can provide you with an instant guideline quote, and connect you with an impartial advisor who’ll be able to walk you through the next steps.