Advisers confident that insurance funding will follow their clients
Elderly people and their families are increasingly concerned about the financial security of care homes, according to long-term care advisers, who believe that care home operators would be facing a brighter future if more people had access to financial advice about funding their care.
In the wake of severe financial problems at the UK’s largest care home operator Southern Cross, other providers are being quizzed about their prospects, according to advisers.
"There is a concern in the market that a care provider may fail and that residents may be required to find alternative accommodation,” said Alex Edmans, an adviser at Saga Personal Finance. “This is a big worry for those in care and for their families. The care home market is currently running at just under 90% occupancy, so there are places available should a care home close, however this is no comfort to those already settled in a home, who may have to find alternative accommodation which is very distressing and unsettling especially to those receiving the care."
"I was in a care home recently and they have had both current and prospective residents ask the question, 'are you financially sound' and 'do we need to be concerned about you staying in business'," reports Andrew Dixson-Smith, managing director of advisory firm Care Fees Investment. "I think that the public will include the financial standing of the care provider more than they have ever done before when doing their 'due diligence'."
Jim Boyd of long-term care funding provider Partnership believes that holders of immediate needs annuities (INAs) are in a “lucky” position in the current climate because the funding they provide is transferrable.
"They can have huge amount of peace of mind as they [INAs] follow the individual,” he said. “The policy is underwritten on their health conditions not on where they are going and if paid to a registered care home provider then it is tax free."
Intermediaries confirmed that transfers of funding across care home providers are easy to conduct.
"If a client moves from one care home to another, it is a simple process," said Dixson-Smith. “The product provider has a payment agreement in place, so future monthly payments would cease and a new payment agreement is created with a new care provider. If a client moves within days of the monthly payment being made, the original care provider may need to return part of that monthly payment. We have not experienced any problem in what is a fairly regular activity. However if the care provider went into administration, the client may be exposed to the loss of one month’s annuity payment."
Edmans confirmed that the process had "always run smoothly" for Saga customers.
"At this point, we would always conduct a review of the customer’s financial circumstances to see whether they are entitled to any new state support and to ensure the INA is still sufficient to cover the new home’s fees, and if not advise on how the new shortfall is best met," she said.
Lack of advice