Prepare for your care

With a little planning, you can make sure you have the right policies in place to prevent you having to sell your home if you cannot live independent ly

With some foresight and planning we can ensure that if we are unable to live independently at home, we don't have to sell our homes to pay for long-term care. If you are in your 40s and 50s you could put in place some investments to help meet the cost of care. When you retire you could use the income to boost your pension - and if you should need help in the home or to go into residential care, you could use the income or the capital to help pay any fees.

One of the best ways of investing is through your pension - either by increasing payments directly into your pension plan, or by additional voluntary contributions. The larger your pension pot at retirement, the larger the lump sum and income you will receive. This can be used to help towards the cost of any long-term care you may need .

Or you could start a pre-funded long-term care plan, which will pay out if you become unable to carry out daily living activities such as getting out of bed, washing and dressing. Some plans provide for part-time help at home, others for full-time nursing care in the home, and others for residential care - or a combination of the two.

The full cost may be covered or you may receive a set amount towards the cost of care. The premiums depend on the level of cover. For example, a 45-year-old single person would pay Prime Health a monthly premium of pounds 54.33 to provide up to 28 hours of weekly care in the home or up to pounds 300 a week towards nursing home fees.

Pre-funded schemes are also offered by Allied Dunbar, Bupa, Commercial Union, Hambro Assured Care, PPP Lifetime Care and Scottish Amicable European.

On retirement, there are a number of things you can do to help meet the cost of long-term care. If you receive a final-salary pension from your employer, the amount you receive each year will be determined by your old employer. If you are given your pension pot and have to arrange your own retirement income, known as an annuity, you will have more flexibility.

You could buy an annuity that increases each year, and so ensure that your income rises as you get older when you are more likely to need to pay for care. If you are in poor health on retirement, you should consider an impaired life annuity. These provide an enhanced retirement income to those suffering from a life-threatening illness. They are able to pay out more as your life expectancy is reduced.

Another option is income draw-down, which allows you to withdraw income from your pension pot until age 75 without having to buy an annuity.

You may want to put off buying an annuity if you expect your health to deteriorate rapidly in the future and so want to wait until buying an impaired life annuity.

For those who have not made any special arrangements to meet the cost of care, the state offers some help. But if you want more say in the type of care you receive at home, or you need to go into a nursing home and you have more than pounds 16,000 of assets, you may well have to meet the costs yourself.

In this situation, an immediate care plan may be the answer. These plans are for people in poor health and are offered by Commercial Union, Eagle Star and PPP Lifetime.

These plans work like annuities - you pay a lump sum of money to the insurer and they guarantee to pay a set amount of income each month which should cover part or all of the cost of your care. The advantage of this type of scheme is that although it costs thousands of pounds, you know you will never be in a position where you cannot afford to pay the carer's fees. The disadvantage is if the care is needed only for a short time, you usually cannot get any refund on your premium

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