Annuity for Care Home Costs

Does anyone know about or have experience of buying and using an Annuity for Care Home Costs (especially for a dementia patient).

Sounds like you’re enquiring about an “Immediate Needs Annuity” which I looked into when I had LPA status over my late father’s financial affairs when he went into a Nursing Home which was eye-wateringly expensive. I’ve done a cut and paste on the pro’s and cons from a guide I found online, hope it may be helpful to you and yours JimDog:

What are the benefits of immediate needs annuities?

There can be significant advantages to keeping back some of your pension pot to purchase a care fee plan in later life. For example:

  • You and your family will have peace of mind that your care costs will be at least partly covered for as long as you need
  • The burden on the rest of your estate will be reduced (potentially leaving more for your family to inherit, though not necessarily)
  • The money from the immediate needs annuity won’t be taxed (if it goes directly to a UK registered care provider), making it superior to a regular annuity
  • Most plans pay out a sum that rises at a set rate to combat inflation
  • You may be able to get a plan that pays a sum to your beneficiaries if you die before a certain age (thus reducing the risk of wasting your money)

What are the drawbacks of an immediate needs annuity?

Of course, care fee plans may have disadvantages too. For example:

  • Although your provider may offer you a cooling-off period (usually 30 days) after buying the annuity, in which you can change your mind, after this period your decision is final.
  • Your care fee plan may not be sufficient to cover all your care costs, especially if the costs of your care rise significantly (e.g. in response to your changing needs)
  • If the payments from your annuity are above a certain level, your entitlement to other means-tested state benefits may be affected
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Sorry I don’t know much about the annuity side, but worth mentioning that if the individual is in the UK and there is a care requirement based on a primary medical requirement (which would need to be assessed) some will be eligible for NHS continuing healthcare.

This link may be helpful:

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I am managing my parent’s dwindling resources and huge care cost burden. I have only one bit of advice; get professional independent financial advice from a firm that specialises in the area. Any other suggestions will be necessarily vague and non-specific.



Good suggestion Alley_Cat, it’s certainly worth bearing in mind and I’ve been involved in applications for both my late parents. It’s a long story but it’s incredibly difficult to get and if it is granted, the money may go straight to the Care Home (if the patient is in one) and into a “pot”. The payment may only cover a small percentage of the monthly fees and it does not mean there will be a reduction in the monthly amount, unbelievably. It’s a loophole in the system whereby Care Home companies can make multiple claims for their residents and the money from any successful applications is pocketed for their own use.


Very sorry to hear that Bruce, the stresses of dealing with the affairs of parents who are failing physically or mentally and need care are significant.

Appreciated. It has been thus for some time. Being almost 6hrs drive away is not ideal either!


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Yes. I took out an annuity policy for my dad who has dementia and has been in a care home for 3 years now.
If I can assist in any way.

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Hi Neil

Thanks for that offer.

If there are any general insights or advice you have about how to do (or how not to do) this that you can post, please do.

(Or if you’d prefer I could ask Richard to give you my email.)


Thankfully (if that’s the right word) neither of my folks went in to a care home or had dementia, the costs of that sound horrific. Now with the energy price situation for the care homes even more anxiety, good luck to all in that situation

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There are (or may be, depending on JimDog’s particular scenario), other options when it comes to specialist care and accommodation.
Some care homes have separate apartments or sheltered accommodation attached to them. These can be bought or rented and are usually well-designed for people who still have some independence but need somewhere they can manage, are safe and have access to round the clock medical assistance in case of emergency. Residents can usually take advantage of catering and cleaning services, some of which will be included in a Service Charge. Outside carers can be arranged to help dress, prepare meals, wash and so on. When and if the time comes, Residents have the option to move permanently into the Care Home attached and if they bought their apartment, that can be sold to help with the fees which are significant. My father was paying nearly £6500 per month for his care home costs after 3 years of independent living in his own attached apartment so that was a huge amount of money saved.

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Long term care for anyone of any age is incredibly difficult nowadays - all that stuff about your home is your castle and making sure you save for later life or to pass onto your children becomes meaningless in such situations.
I find (working in an associated environment) that the financial aspects are likely to be the most upsetting for families [above and beyond dealing with their loved ones illness] when it becomes apparent what’s involved.
There are significant differences between the approaches in different sections of the UK - so always try to get local advice rather than rely on generalisations.
CHC or continuing health care is always worth looking into - but the criteria can be very high within health boards.
It is always important to remember that a health board has to consider everyone’s needs, so ‘serious’ to them has a very different meaning than families for whom their loved one is seriously ill. It is something that rarely gets explained as part of the process and they are not able to show you anyone who meets that criteria for you to see what they mean…
However, case law advises that any care above and beyond what a local authority might be reasonable expected to provide and is neither ancillary or incidental to that sort of provision should be considered.


My mother is now at the stage where full time care home care is becoming essential because of dementia.

Jim, im happy to exchange via email.
@Richard.Dane … would you mind?


thanks Neil

I’m very sorry to hear that.

Oh dear JimDog, I’m really sorry. I’ve been there myself, it’s an awful disease. I hope you get the support she and your family need.

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Thanks for the kind words, chaps.

I am mainly trying in this thread to focus on fact finding about how annuities for care work if anyone knows about or has done that.

[Admittedly, this is hardly down the ‘Fun and Frivolous Friday Night’ end of the spectrum of possible topics to chat about!]


Richard has passed my email to you I believe.
Drop me a line.

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Of course, for far too many of us there comes a difficult time when it is our turn to return the care we were provided by our parents, but it is rarely a pleasant task.