View more on these topics

Clients in safe hands

Not surprisingly, long-term care insurance is generally nowhere on the agenda when IFAs are talking to clients in their 30s and 40s. After all, at that age, most clients will have other financial priorities.

Most will still be paying off mortgages, many will still be planning or financing school or college fees and for a good percentage this will often be the time when serious planning for pensions and other savings is just getting into gear.

But for those in their 50s and 60s, it is a different story. While most IFA clients in this age bracket will not yet be retired, retirement is inevitably going to figure prominently in their thinking and in their financial planning.

We will assume that both IFA and client are aware of the financial consequences of their needing care. Advisers have established his or her wealth and know that they would have to pay for their own care.

Advisers have convinced their clients of the need for LTC insurance after establishing that he or she does not want to see any of their savings and investments disappear in care home fees.

When do IFAs complete the work and when do they give the advice? Some times will be more opportune than others.

First, let us take the regular reviews IFAs carry out while a client is in his or her early to mid-50s.

What can an adviser do at this stage, assuming the client is fairly typical in so far as the mortgage is “under control” if not already paid off, there are no dependent children and the main priority is now their retirement?

The focus is on maximising income and measuring, if not minimising, the corresponding expenditure. Arranging LTC insurance in this scenario can be quite straightforward.

Good LTC insurance plans will offer a paid-up value facility so, by starting regular monthly premiums now, a reasonable amount of LTC benefit can be built up for the client, even planning for premiums to stop at retirement.

While this paid-up value may not cover all the care bills – that will depend on the amount of insurance bought to start with – it could well offset a fair proportion of the LTC bills and so save a client a great deal of his or her own cash.

Suppose a client starts paying LTC insurance premiums now at the age of 55. By the age of 65, assuming he chooses to retire then, a considerable paid-up value could have been built up.

As I have said, how much depends on the plan chosen.

But if at that stage, after 10 years&#39 premiums have been paid, the paid-up value is aro-und, say, £1,000 a month of LTC insurance benefit, this would make a worthwhile contribution to any future LTC costs.

The client will have this amount of protection in place without having to find or budget for any further LTC insurance premiums in retirement.

Then, in the final planning exercises IFAs undertake with clients before retirement takes place, LTC insurance planning will be a must.

At this stage you will know:

What the client&#39s pension is going to be when the time comes.

What the client&#39s likely outgoings are going to be.

What pension lump sums will be available at retirement.

What other lump sums, share options, for example, will then come to fruition.

You will also know:

How much the client has got to leave to his or her heirs and who it is to be left to.

What is going to have to be done to provide against inheritance tax.

What the likely cost of LTC will be if it should ever be needed.

Plan from this solid base of infor-mation. IFAs have got enough information to do this. In the LTC arena, do not forget these two important pointers.

The Government has set out its stall on LTC financing – the current arrangements are with us for a good while – and IFAs have as much certainty in this area as they are going to get.

(For clients in Scotland, the position is not 100 per cent clear at present but you do still know that the bulk of care home costs – the board and lodgings element – will still have to be paid by the client if his or her assets are over the means-test limits.

The actual cost of care is likely to keep going up along with other costs.

Armed with this information, IFAs can establish the following:

How much a client will be able to put towards any future care costs, assuming he or she is not going to start eating into available capital to meet care costs.

What level of insurance benefit is needed to take up the shortfall.

How premiums can best be provided as regular premiums from ongoing pension income or by a lump sum from a pension lump sum or other one-off “income” and then arrange the long-term care insurance accordingly.

These are distinct opportunities for arranging LTC protection and distinct bases for arranging it, both doing a most useful job in protecting your clients.


Isa hidden charges slammed

Investors in Isas are paying additional charges not included in the annual management charge amounting to £22m a year, according to fund researchers Fitzrovia International.The discrepancy comes from non-investment management charges, paid to third parties such as administrators, trustees and auditors, which are not always included in the stated management charges.Fitzrovia chief executive Paul Moulton […]

Flexible friends at Market Harborough

The strength of the remortgage market could mean greater interest in Market Harborough&#39s flexible two-year discount mortgage, which is available for first-time buyers and remortgages up to 90 per cent of valuation.Mortgage lending fell from £10.1 billion in December 2000 to £9.5 billion in January 2001, but the Council for Mortgage Lenders found that remortgaging […]

Standard Life – Stakeholder Pension

Tuesday, 27th February 2001.Type: Individual stakeholder pension.Minimum premium: £20.Minimum-maximum ages: 0-74.Fund links: Stakeholder with-profits, stakeholder cautious managed, stakeholder property, stakeholder FTSE tracker, stakeholder protection, stakeholder UK equity, stakeholder ethical, stakeholder North American, stakeholder fixed interest, stakeholder managed, stakeholder sterling, stakeholder stock exchange, stakeholder international, stakeholder Japanese, stakeholder European.Charges: Annual 1 per cent. Reduction of 0.2 […]

Fund managers see Europe as safe haven

Fund managers say European funds are set to perform strongly this year according to a survey from the investment fund service Keydata. Fund managers from HSBC, Invesco, Investec, Old Mutual and Threadneedle say with the slowdown in the US economy many investors are now turning their attention to Europe as a safe haven. They say […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm