Care Fees Help

    HOME  |  CARE FEE PLANS  |  ABOUT US  | OUR SERVICE

Long Term Care Plan Case Study

Mary’s story

Mary, a widow, was diagnosed with Vascular Dementia at the age of 86. She moved from her own house to a residential care home near her closest relative, her niece, who holds Power of Attorney. The fees are around £44,320 a year. Mary was relatively well off with savings of £40,000 and income of £18,000 per annum from Attendance Allowance and state and private pensions. Her house had just been sold for £186,000.

Mary's niece was concerned as to just how long her savings could last. With a total of £225,000 to fund the shortfall in fees of £26,320 a year, a return of nearly 12% a year would be needed at a time when the bank base rate was just 0.5%.

What Mary wanted

Mary’s financial independence was very important to her niece. She didn’t want her to have to live off State Benefits and have the quality of her care dictated to her. She was also worried that her limited financial resources would run out.

In addition, Mary would be upset to know that she would be unable to leave an inheritance to niece and other relatives. At first sight, her personal and financial dilemma looked impossible to solve. Mary's niece contacted us and we arranged a meeting to discuss what night be done.

We have developed an in house "financial forecasting tool" called FACT which allows us to input details of income, outgoings, savings and savings rates and inflation. These are all variable inputs so we can produce "what if?" scenarios for discussion.

The first scenario was the current situation - how long would £225,000 last if the shortfall in fees increased by 4% a year and a rate of 2% net was achieved from deposits?

The answer was, alarmingly, that Mary's lifetime of savings would be wiped out in just 6 years, meaning that she would have to placed in a cheaper home at a time of great vulnerability.
 

Having received terms from Immediate Care Plan providers based on Mary's medical history, we then looked at 5 different scenarios with differing amounts in the Immediate Care Plan, invested and on deposit. We finally came up with a plan that would guarantee fee payments and hopefully preserve some of the capital as well.

The last scenario showed that, given the level of risk that Mary's niece was prepared to take, that at the same point where the money ran out in Scenario 1, 2016, there could be some £127,177 left in investments and deposits. Whilst the funds could still be completely depleted , this does not happen until 2036 when Mary would be 112, should she live that long.

The Care Fee plan selected paid for 50% of the shortfall, escalating at 5% per annum. We also built in some guarantees to protect part of this capital should Mary die in the early years. The premium for this plan was approximately £90,000.
 

Care Fees Help is a trading style of Asset Investment Management Ltd, Drayton Old Lodge, Drayton, Norwich, Norfolk, NR8 6AN
Independent Financial Advisers

Tel 01603 869988

Authorised and Regulated by the Financial Services Authority No 462797. Registered in England and Wales
company registration number 5880144.

Tax advice is not regulated by the Financial Services Authority