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Care plans

You can use any lump sum you have available to buy a long term care plan from a specialist provider. The company which provides the plan in turn offers to pay out money to help fund your care fees for as long as it is needed.

If you need to go into care now or in the near future, you may wish to consider an immediate care plan. With this type of care funding annuity, payments from the plan to you or your care provider start immediately and continue for the rest of your life. In the event of death early into the care plan, the income payments you receive may be less than you invested. The level of payment from the plan depends on a number of factors, namely how long you are expected to live and the level of interest rates in the economy.

Immediate care annuities may include a money-back guarantee, offering to pay back some of the lump sum used to buy the plan in the event of death within the first six months. Further capital protection of your lump sum can be provided for an additional upfront payment.

A care plan will guarantee a specific level of income to help pay for care fees for the rest of the individual’s life. The cost will depend on:

  • The health of the individual - cost reduces depending on the severity of the condition/illness
  • The age of the individual - the older the individual, the cheaper the plan although this will be taken into consideration with their health status
  • The cost of the care home fees – cost will rise in line with care home fees.

The average cost of a long term care annuity is £100,000 and while this may appear to be on the high side, when set against average annual nursing care home fees of £38,000 this represents just over two and a half years’ worth of fees. With this in mind it should be noted that the average length of stay in a care home for a "self-funder" is 4 years and that 1 in 10 live 8 years or more. (Partnership statistics 2010)

Speak to a specialist care fees adviser for more specific information on costs and suitability of long term care annuities or click here to make an initial enquiry.

Care plan features

Long term care plans can come with additional features which may suit your particular situation. These include:

  • Index-linking – Some plans may offer to link the level of regular payments they make to you or the care home to the rate of inflation so they keep pace with the changing cost of living
  • Escalation – You may be able to request for the payments the care plan provider makes to increase by a fixed amount each year, say 1-8%, to help cover any future rises in care costs
  • Money-back guarantee – This guarantee ensures that a percentage of the lump sum originally paid to the care plan provider will be returned if you die soon after buying the plan, typically within six months
  • Capital protection – An additional element can be arranged to return some of the original lump sum you paid to the care plan provider to your estate or beneficiaries in the event of death

Tax benefits of long term care plans


  • Income tax – If money paid out by the long term care plan goes directly to a Care Quality Commission (CQC) registered care home or other care provider, there is no income tax to pay on it. You can opt to receive these payments yourself, for instance if you no longer need residential care, but you will then have to pay income tax
  • Inheritance tax – By using your money to buy a long term care plan you will be reducing the value of your estate which may help with inheritance tax planning; this can be a complicated area for which you should seek financial advice

Please note that all statements with respect to taxation in this website are Partnership's understanding of current taxation legislation. The rules governing taxation are subject to review and can change. Tax will depend on individual circumstances.


Annuities explained - what is a care plan?