Immediate Care Plan or Care Annuity
An immediate care plan (ICP) is a secure and convenient way of providing a guaranteed income for funding your long term care. (Care plans are sometimes known as care annuities; we have used the term care plan in this article but this is interchangeable with care annuity).
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In return for a lump sum payment a care plan will pay your care provider a benefit for your lifetime.
You choose the level of benefit that you need, for example, if your care home charges £2,500 a month and your income is £1,000 a month, you would usually set the benefit at £1,500 a month.
Your immediate care plan can be set to increase the benefit each year with the aim of keeping pace with fee increases.
To keep this easy to read we’ve written about funding care home fees, but care plans can also be used to fund long term care at home.
The Advantages
- The benefit from the immediate care plan or care annuity should mean that you have the income to remain in your chosen care home for your lifetime. Providing that the benefit is set at the correct level you should never run out of money and need to rely on your local authority for funding.
- By buying the care plan you may also protect your remaining capital for your family as this should not need to be used to fund care (unless you need a higher level of care in the future or your fees increase significantly).
- The benefit from the plan is tax free, providing it is paid directly to a registered care provider. It will not affect your income tax allowances or rates.
- If you move care home you can simply ask for the benefit to be paid to the new home.
The Disadvantages
- Immediate care plan’s are not flexible. They will pay the benefit chosen even if your circumstances or long term care needs change .
- The premium is never returnable. If you die shortly after buying a care plan your estate will be worse off.
The Risks
- Once paid, the premium is not returnable. You cannot get your money back or change the benefit payable.
- If you die in the early years it is likely that your estate will be disadvantaged by the purchase of a plan. You can reduce the initial cost by using a deferred care plan instead.
- If your care needs change you may need to top up the benefit from other sources.
Where would you like to go now?
Immediate Care Plan Illustration Request
Immediate Care Plans in use - case study
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