Later life planning and care annuities for farmers
As a later life planner, I work with families to ensure that they have strategies in place when a family member requires care in their old age. Over the years, I’ve seen that while many farming families have estate planning for what happens after a family member’s death, not enough have considered the impact if one of them needs care.
The financial burden of long-term care in old age can be significant. Fees will vary depending on the area you’re in and the type of care you choose. ‘On average, it costs around £800 a week for a place in a care home and £1,078 a week for a place in a nursing home. However, these are average figures – individual care homes may charge more or less.’ – Age UK, July 2024.
Many families wish to care for their loved ones themselves, but this isn’t always practical or appropriate, especially when complex care is needed. The reality is that the cost of full-time care often exceeds income from any pension and other sources, leading to difficult questions about how to fund it.
20th November 2024
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Andrew Page See profile
Financial planning and care annuities
With my farming clients, I encourage them to consider whether they have the ability to invest some money outside the farming business as part of their succession planning. This thought process has become even more important in light of the Autumn Budget announcements and the long-term financial implication for farmers. If there are savings, pensions, or other investments, these can provide resources before the need to sell essential business assets arises.
Of course, setting money aside is only possible if there is a surplus, which is becoming harder to achieve. I still advise that planning for the future is crucial, as having wealth tied up in a business doesn’t exempt it from care costs. Assess the assets you have available and determine how long the money will last under different scenarios.
Starting point
The first step is always understanding what resources are available, which can sometimes be challenging in rural businesses due to unclear ownership structures. The goal is to identify what can be used to cover the gap between income and care costs, whether for home care or moving to a care home.
There is no single correct answer for these situations, but it’s important to be able to make informed decisions. Some families may choose to spend their savings over time, I use cashflow forecasting to estimate how long the funds will last, considering that care fees inflation often outpaces general inflation, widening the gap between income and expenses.
Funding options
One option is to invest money, aiming for a better return than what would be earned in a bank, though there is the risk of the investment losing value. Alternatively, a care fees annuity can provide a guaranteed annual income to help pay for care, in exchange for a one-off lump sum. The cost of the annuity depends on the individual’s health and life expectancy.
This can offer peace of mind, as it will provide an income to help cover care fees for the rest of the person’s life, effectively capping the total expenditure. However, if the person dies early, the annuity payments may not fully cover the initial cost, unless capital protection is included, which returns some of the capital on a reducing basis.
While care annuities can be a viable option, they can be expensive if the individual is expected to live a long time. It’s also important to consider that care needs and associated costs may increase over time. The cost of an annuity varies significantly, usually returning 20-35% of the lump sum annually, depending on the individual’s health assessment.
For more information speak to Andy Page direct or contact us here.