how does a Care ISA compare?
Different ways to pay for care
08 Mar 2017
| Product | What is it? | Pros | Cons |
|---|---|---|---|
| ‘Immediate needs’ annuities | Buy on entering care. Pay upfront lump sum to guarantee income to pay for care until death | Majority of care costs covered until death | Expensive. The average premium is around £100k |
| ‘Deferred immediate needs’ annuities | Buy on entering care. Income delayed for e.g. 1 year, then guaranteed income to pay for care until death | Cheaper than ‘immediate needs’ annuities | Risk of no payment |
| ‘Whole of life’ policy with a long-term care element | Pays a lump sum when you die, with acceleration of the lump sum payment if and when long-term care is needed | Seen as a good halfway house for workers and insurers | Lump sum may not be sufficient to cover care needs |
| Care ISA | A way for consumers to save ‘tax free’ for their own healthcare | If unused, proposed that it could pass IHT free on death to spouse or beneficiaries Potential to transfer in savings from other ISAs | Experience of LISAs shows that providers are slow to develop long-term ISA products Need to get people engaged with saving more – would saving for care act as an incentive? |
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