View more on these topics

E&Y: Providers to launch long-term care annuities ‘in months’

Pensioners-Pension-Protest-700x450.jpg

Providers will continue to shun the pre-funded care insurance market but could launch new “immediate needs” annuity products within months after the Government confirmed it will introduce a cost cap.

Earlier this year the Government set out plans to introduce a £72,000 cap on long-term care costs from 2016.

The means test threshold above which people must pay all their care costs will also rise from £23,000 to £118,000.

Ernst & Young EMEIA financial services manager Dan Mahony says: “The reforms proposed by the coalition do not overcome the principal objections to purchasing a pre-funded care plan.

“In a market where it is difficult enough to persuade people to make adequate provision for their income in retirement, expecting a significant number of customers to save or set aside funds for the possibility they will require long-term care is a huge leap of faith.

“These changes, despite providing marginally more certainty over the potential costs, do very little to make the pre-funded option a more attractive prospect – not least because the ‘hotel’ costs remained uncapped as a potential liability.”

Mahony is more positive about the future of immediate needs annuities – long-term care insurance bought at the point the individual requires the cover.

He says: “Whilst we view significant growth of the pre-funded market as unlikely in the short-term, the reverse is true of the immediate needs market.

“However, the lack of providers and a scarcity of advice in this area have suppressed demand.

“We expect new providers to enter the immediate needs market in the coming months.”

Worldwide Financial Planning IFA Nick McBreen says: “Immediate needs annuities could be a useful part of the retirement solution for middle England but it is important people consider how to fund old age more broadly rather than expecting a single product to solve everything.”

Recommended

F&TRC appoints David Child as non-exec director

The Finance & Technology Research Centre has appointed Lifesearch non-executive chairman David Child as non-executive director. Child will take up the role on 1 May. He is also non-executive chairman of pensions technology business Dunstan Thomas. F&TRC managing director Ian McKenna says: “I have worked with David previously in a number of other organisations and […]

Standard Life Wrap to enable auto-disinvestment

Standard Life Wrap has announced it will facilitate auto-disinvestment and has increased the options for taking an adviser charge from clients’ investments. Auto-disinvestment is the process of funding an adviser charge from client holdings to cover any shortfalls in the cash account. Standard’s auto-disinvestment process will launch in July and will proportionally take an adviser charge […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment