Mum has been in a Care Home for 15 months, and most of her savings now spent. Fortunately I’ve just sold her home (P of A)and don’t want to put the funds with a manager, exposed to fluctuations in stock markets as I’ll be drawing down monthly to pay her Care Home fees.
Any suggestions…realise that I must do my own research.
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Typically stock market investment only makes sense for the longer term - 5 years or longer - as market fluctuations can generate significant short term losses and gains.
Without wanting to be overly blunt, I suspect the need is to ensure funds are secure for the next few years with as little risk as possible. What I have written below assumes you have a lot of cash covering many years care home fees - this may not be the case.
Were I faced with a similar dilemma (sadly both parents long gone) I would be inclined to invest sufficient in straight forward interest bearing accounts to cover up to (say) 3 years care home fees and any balance in an FT tracker fund.
Split the cash between banks with no more than £120k in any one bank to be covered by the FSCS guarantee. Consider fixed term bonds to mature in chunks over the three year period and keep some cash in an easy access account for emergency or immediate needs.
If you an able invest some in the stock market you could sell some at the end of each year and reinvest in bonds to ensure you always have at least two to three years future charges secured.
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Thanks Terry…even though I have P of A, which i took out several years ago before she was diagnosed with Alzheimer’s, some internet banks do not allow accounts to be managed by a third party.
At 98yo I want the money, a substantial sum ( to me at least) to be easily accessible to pay the monthly care home fees. I’m thinking 12 month fees in a linked interest bearing BS account, with a 12 month bonus, the balance, which is in excess of the £120k FSCS amount, into NS & I Guaranteed Growth Bonds paying 4.07% fixed for 1yr. In the next tax year maximise the cash ISA allowance as interest will exceed the current tax free allowance ..if that makes sense.
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I believe all funds in NS&I are covered by the government. There is no upper FSCS £120k limit.
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An FT (FTSE?) tracker fund is still equities and could still drop 40% in short order and whilst timing the market is generally a bad idea, at the moment you would be going in at near an all time high.
High quality income bonds or other bond-like investments, or funds designed to preserve value are theoretically the thing. Or if you want no risk at all, bank deposits with FSCS cover.
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My brother and I faced this problem a couple of years ago for our mum. After considering the options such as insurance products, we opted for NS&I as fully secure and easily managed online.
These are taxable of course but, had we been minded, we could have then decanted the funds into an ISA at a rate of £20k pa. However the difference in resulting income would have been pretty immaterial against home fees of £70k plus a year.
As ever you need to consider your own situation and take professional advice as necessary.
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My sdvisor pal agrees with my thoughts…Building Society paying 4% AER gross, linked to mums current account for monthly drawdown to pay Care Home fees. Rest into NS & I fixed term bond with easy access. Safe as houses.
No worries regarding any market volatility in these strange times.
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Just jumping in on this, can't offer any financial advice but just reading through the thread Martin mentions care home fees of 70k a year!!! Excuse my language but WTF, is that really the cost of full time care? How the hell can such a cost be justified?
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Yes, that’s not an unusual amount to pay for 24/7 dementia care in en-suite facilities in Edinburgh. My maiden aunt is in an even more expensive home.
Some of the charge is offset by the council (or NHS?). I forget how much as my brother deals with that but it’s not a huge percentage. Also it’s inflated by private clients’ charges subsidising those who are unable to pay.
I can see both sides of the arguments as to whether the state should pay more. The fact is that the welfare state can’t afford to pick up everyone’s home fees.
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Cost of a 3 star hotel is £60-100 per night depending upon time of year and location.
Add cost of meals, washing, cleaning, dressing, feeding, 24x7 care cover, etc and £70k pa is understandable. More upmarket facilities, possible entertainment, etc and the price gets higher.
Should the state pay - in my opinion only as a last resort. The effect otherwise is that the state or taxpayer is effectively funding the beneficiaries of the deceased will by increasing the value of the estate.
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>> Should the state pay - in my opinion only as a last resort.
Absolutely. No reason why you should pay tax to backfill my inheritance or vice versa.
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>> Should the state pay - in my opinion only as a last resort. The effect
>> otherwise is that the state or taxpayer is effectively funding the beneficiaries of the deceased
>> will by increasing the value of the estate.
>>
Also a "last resort" opinion holder here. I wish though there was an option to take out insurance against it though as an additional NI contribution, so if you had, say, the full 20 years of Care Home Fees Insurance contributions, then the state picks up the bill without the worry.
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>>Also a "last resort" opinion holder here. I wish though there was an option to take out insurance against it
>>though as an additional NI contribution, so if you had, say, the full 20 years of Care Home Fees Insurance
>>contributions, then the state picks up the bill without the worry.
You don't need the state to do that. Just put the money away yourself for the 20 years. That way you have full control of it and the state can't suddenly change the rules. I bet most people won't do that though. They expect the govt to do it for them.
Last edited by: expat2 on Sat 24 Jan 26 at 01:12
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>> >>Also a "last resort" opinion holder here. I wish though there was an option to
>> take out insurance against it
>> >>though as an additional NI contribution, so if you had, say, the full 20
>> years of Care Home Fees Insurance
>> >>contributions, then the state picks up the bill without the worry.
>> You don't need the state to do that. Just put the money away yourself for
>> the 20 years. That way you have full control of it and the state can't
>> suddenly change the rules. I bet most people won't do that though. They expect the
>> govt to do it for them.
Not all old folk end up in a care home. The average life expectancy of a care home resident is ~2 years but you may survive 2 weeks or 20 years.
Saving the total cost of care would be impossible for most - 20 years at £70k pa =£1.4m. And some may want to spend more to get a better quality of care.
Spreading the risk through insurance may reduce the actual cost to a lump sum of, say, £60k at age 60. Entirely achievable for many.
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Unless you make the insurance compulsory you still have the problem that if you don’t have the insurance or cash for care the State will pick up the tab so many will think why bother?
The prudent already subsidise the system to a massive degree. The care home fees for my mother were nearly double what the care home were being paid by the council for the women in the next room.
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>> >>Also a "last resort" opinion holder here. I wish though there was an option to
>> take out insurance against it
>> >>though as an additional NI contribution, so if you had, say, the full 20
>> years of Care Home Fees Insurance
>> >>contributions, then the state picks up the bill without the worry.
>> You don't need the state to do that. Just put the money away yourself for
>> the 20 years. That way you have full control of it and the state can't
>> suddenly change the rules. I bet most people won't do that though. They expect the
>> govt to do it for them.
No...you're missing out the insurance principle. If only say 1 in 10 needed care for an average of 2 years at £80k per year, total £160,000, then it would only take £16,000 in the pot for each person.
To DIY it you'd need to save £160,000 'just in case'.
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I know children of a Care home resident, in the same care home as my mum, who have bought a policy which pays all her care home fees.
The policy cost circa £200k, the person in question has a few minor ailments, in her 80s, is mobile and compus mentis...been diabetic for years, but gets out and about in relatives cars for lunches and talks.
I suppose it’s a gamble....quids in if you live 3+ years, and Care Home fees will only increase.
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Is the provider part a FCA? 'regulated' scheme? Or is it like funeral plans where many smaller providers went bust?
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Long Term Care insurance is not available in the UK. Insurers aren’t interested in providing it. The only feasible solution is a State run compulsory scheme.
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House sale funds - Terry
