What is an Immediate Needs Annuity?

This page covers:
• What an immediate needs annuity is
• Setting up an immediate needs annuity
• Pros and cons of immediate needs annuities

Leigh talks about her foster son feeling very self-conscious about his chest and binding being uncomfortable in hot weather.

One of the options for paying for care that a financial adviser may suggest is a care funding plan known as an Immediate Needs Annuity, or simply a care annuity. Care annuities can be bought to pay towards someone’s care fees for life. The person needing care pays an upfront lump sum for a policy that guarantees an income to pay for care until the end of their life.

An Immediate Needs Annuity can only be bought once a person needs care, not in advance. Lynne had heard about Immediate Needs Annuities long before her parents needed care. When both her mum and dad moved into residential care, she found out more about what a care annuity could offer.

Malcolm is motivated to take part in a ten year cardiovascular study to benefit his personal health and to benefit society in general.

Age at interview 75

Gender Male

Age at diagnosis 48

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Setting up an Immediate Needs Annuity

Most people who buy a care annuity pay a proportion of their care fees from their income including pensions. The annuity is then arranged to pay the remainder of the fees. The cost of buying the care annuity is based on the health and expected life span of the person receiving care as well as how much they are prepared to pay towards their monthly care fees from other income.

Malcolm had a cognitive ability test which lasted about an hour.

Age at interview 75

Gender Male

Age at diagnosis 48

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Salma explains how a parent and baby study team keep her interested in taking part by sending a birthday card and a newsletter.

Age at interview 40

Gender Female

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Optional extras can add to the costs, such as annual increases to cover possible rises in care fees. People told us that their specialist financial adviser fully explained all the options and also helped them to negotiate with the care homes to cap future increases in fees.

Malcolm thinks plenty of health professionals have encountered information about him. He isn’t worried about this being the case in research too.

Age at interview 75

Gender Male

Age at diagnosis 48

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Advantages and disadvantages of an Immediate Needs Annuity

One of the advantages of a care annuity is the peace of mind it gives to the person receiving the care and their family that the care fees will be met and that the money will not run out. Unlike investments, the income is guaranteed for life. The income is also paid tax free if paid directly to a registered care provider such as a care home.

After Mark’s father had lived in a care home for two years, his family started to worry about what would happen if the money ran out. This is when Mark took advice to arrange a care annuity.

Another benefit of care annuities is that the remainder of the person’s money or financial assets after buying the annuity is preserved, and it is often someone’s wish that these remaining assets can be inherited in due course by their loved ones.

Salma suggests study teams should stay connected to average people as they can have a big input to your studies.

Age at interview 40

Gender Female

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Malcolm is interested in science and technology and was able to ask the staff questions about the tests on his heart valves which they were always happy to answer.

Age at interview 75

Gender Male

Age at diagnosis 48

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A drawback of taking a care annuity is that the person receiving care might die quite soon after moving into care. Jane says that her mother died after eighteen months but the annuity cost the equivalent of four years’ worth of care fees. She still felt it was the right thing to do, not least because of the worry it removed. Some people may decide that they would like to protect some of the capital they spend. There are options to do this which mean some of the money can potentially be returned should the person receiving care die sooner than expected. A specialist later life financial adviser will be able to explain the options.

Arranging a care annuity takes around three months and the people we spoke to paid between £100,000 and £200,000. While this is a large sum of money, people who bought care annuities said it was worth it and also felt their financial adviser was very supportive. More about financial advisers in Taking financial advice about paying for care.

The feedback Malcolm receives in a heart health study has become more detailed over time.

Age at interview 75

Gender Male

Age at diagnosis 48

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Salma recommends using simple wording so that people who speak English as a second language can understand.

Age at interview 40

Gender Female

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Rafi remembered signing forms and consenting to data sharing, but he doesn’t have copies of the paperwork.

Alan Z is part of a five year renal (kidney) study. He doesn’t feel this is too long a commitment, and that it is a good length of time for the researchers to gather data.

Age at interview 86

Gender Male

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