We are becoming increasingly familiar with the effects of an ageing population on pensions funding and the shortfall in State benefits. However, there is another serious issue that is not considered as often – the older we get, the more healthcare we potentially need. Indeed, just when the State is getting increasingly concerned by the demands on its funds, the costs of long-term care is rising. Many people are therefore looking for ways to help prepare for such an eventuality – either by a pre-funded policy or, if the situation has already arisen, by using an immediate care plan.
At the moment, what few pre-funding options exist are being rejected by many in favour of other priorities. As a result, the vast majority of people reach the emergency category without any specific funding provision. This may not be a problem if your income is sufficient, or you have significant savings - you may be able to make the payments from existing resources. In the case of short-term requirements, this could indeed be the most appropriate course. However, there are other considerations, particularly if your needs are long-term.
For example, what happens if your payments for care increase quicker than your income? If you are using your savings, how long will they last? Could they run down before your needs run out? What if you live much longer than expected? These are common concerns for anyone facing an immediate need for care. However, there is another option to consider - you can purchase an ‘immediate care plan’. This can guarantee to cover any shortfall between what you can pay and your actual care fees for life – or for as long as you need them, whichever is sooner.
Finding a lump sum may be difficult but thanks to house price rises, there may be equity in your house. This brings its own considerations – you may have to fund mortgage payments or sell the house and lose the family home from your estate. There are also some risks, primarily the that you die earlier than expected and therefore lose out compared with paying the fees yourself. In exchange for this risk, the provider takes on the happier possibility you will live longer than expected and therefore need more money than you invest. An adviser can help you through the maze - although, speak to a suitably qualified adviser and be aware that the FSA does not regulate some forms of Long Term Care and Estate Planning.
