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Long sighted

Tish Hanifan and Jane Finnerty of the Society of Later Life Advisers show how important it is to factor long-term care into retirement planning

We often associate long-term care with the very elderly but the need for care can strike at any age. Sue and Mike had looked after their parents well. Susan’s mother was the last to pass away in January this year at the ripe old age of 96, having been cared for by Susan for the last six years in Mike and Sue’s family home.

Mike, having sold his small graphic design business, still worked part-time doing illustrative work. Sadly, in March aged 67, Mike suffered a severe stroke even though he had had no major health issues. This has left him in a wheelchair, severely debilitated and unable to care for himself. Fortunately, he is slowly regaining his speech.

Mike needs long-term care so they decided that Sue would bring Mike home and she is now his primary carer. Their only daughter lives in Leeds so this is something that Susan is doing largely without any other family help.

This is not the retirement they had planned. Having worked hard and supported their parents, they were looking forward to travel and free time together. Sue initially had to deal with the finan-ces until Mike was able to communicate again.

Luckily, both she and Mike had made EPAs so she was able to take over Mike’s financial affairs and deal directly on all matters with their IFA. They had known their IFA for over 20 years and she had set up their retirement plan to be as flexible as possible while pointing out the risks associated with deferring various pension options and investment risks over the medium to longer term.

Mike had deferred both their state pensions as they had not needed the money and his personal pensions were still invested so Sue needed help to decide the best course of action. Her concerns were about how they could maintain a reasonable lifestyle and now fund the additional income they would need to help Mike get the best care available. Mike has indicated that he wants to stay at home as long as possible.

In such situations the local authority has a legal obligation to carry out an assessment of Mike’s care needs. They carried out this assessment and then went on to assess his financial position as this would determine if he received any financial help towards his care needs from the local authority.

He had assets in excess of his local authority limit and was regarded as a “self-funder” who had to find the money to meet his own care needs. With this in mind, their IFA reviewed their position and plans for the future, including:

  • What realistically is Mike’s health prospects and longevity? This cannot be quantified with absolute accuracy but should be considered in broad terms.
  • How Susan’s health is now and how is it likely to be affected by her new caring responsibilities as time goes on.
  • What non-means tested welfare benefits might be available to them, for example, attendance allowance.
  • Will Sue be eligible for bene- fits now she is a full- time carer?
  • Are there any local authority grants to adapt their home which Mike and Susan might now be entitled to despite the fact that Mike is not entitled to state-funded care?
  • How the house would be treated if Mike needed to go into residential care or a specialist nursing home.

Would an immediate needs plan be a consideration then ?

  • How long will their savings and investments last?
  • Should they now start to draw their state pensions?
  • Would it be worth Mike taking an impaired life annuity now or should he keep his funds invested to provide a spouses pension later for Susan?
  • What other options are there for his pension fund and spouses pension?
  • Is equity release an option to fund his care at home or should they seriously consider moving?

Legal matters were also discussed, including:

  • The need to make an LPA allowing Susan to carry out Mike’s wishes with regards to his health and welfare.
  • Reviewing their wills in light of their current IHT liability with a house worth £1.4m. This has to be balanced against the financial implications of care funding both for Mike but also potentially for Sue in the future.

This required their IFA to work with the family solicitor to see how their work could dovetail to provide the best advice for clients.

Understanding the financial health implications for later life is essential if the advice is to create a retirement plan that will cover off the various risks associated with later life such as poor interest rates, inflation, living too long and running out of money, losing mental capacity or becoming physically disabled.

Factfile

  • One year after a stroke, about 80 per cent of people are at home and 12 per cent live in a residential or nursing home
  • Around 65 per cent of people who are entitled to the attendance allowance don’t claim it.
  • If your client’s capital is below the “upper level” of £23,000 (2009/10), you should be entitled to some financial support from your local authority. If you have capital of less than £14,000, you will be entitled to the maximum financial support
  • 25 per cent of those who are ” retired” are still in the workplace, making the need to recommend variable retirement options essentialTo find out more about becoming an a Accredited Later Life Adviser, contact the Society of Later Life Advisers at www.societyoflater lifeadvisers.co.uk

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