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Annuity Based Schemes

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Immediate Care Plans

A tailor-made annuity-based product for persons at the point of needing care. Payments can only be made to a CQC-registered ‘provider of care services’, not to the beneficiary or any third party. A lump sum of capital is paid to the provider in return for a guaranteed income for life. This scheme is used if you are already in need of care. A medical assessment will help determine how much you will pay for your chosen level of income. The policy continues to provide an income only whilst long-term care is required. This income can either be fixed or on an index-linked basis to keep up with inflation.

Advantages Disadvantages
The income is normally paid directly to a care provider, e.g. a Live In Care provider If you die soon after taking out a plan it could be poor value for money
The greater the care needs, the greater the income payments You cannot normally cancel the plan or get your lump sum premium back, except during the statutory post-purchase cooling off period
As the applicant is assessed as needing care, a claim on the policy is almost certain There is no payout to your estate or beneficiaries on death
The lump sum payable to the plan provider would, for Inheritance Tax purposes, reduce the value of the estate by a corresponding amount You cannot normally cancel the plan or get your lump sum premium back, except during the statutory post-purchase cooling off period
Unlike other kinds of annuity schemes the payments are tax free If you would like the services of a carer or companion but the assessment says you do not need care this product will not pay out
  Policies will only pay the income directly to a registered care provider and not to the policyholder or voluntary/directly employed carers.

Impaired Life Annuities

Your accumulated pensions are transferred to an annuity office and converted into a guaranteed income for life. The amount of each payment is determined from the beginning and can include various 'options', such as minimum payment periods, a dependant's pension and inflation protection.

Certain annuity companies provide special impaired-life annuities. If an individual has particular health problems they may qualify.
Impaired-life annuities pay a relatively high rate of annuity income
The applicant is medically underwritten to determine the maximum rate of annuity, which will be guaranteed for life. Income payments receivable from the plan are taxable under the UK's PAYE system at your highest marginal rate of Income Tax.

Advantages Disadvantages
The annuity income payable from your pension funds is increased to compensate for any health problems which could reduce your life expectancy (e.g. cancer, stroke, etc.) Once established, the annuity cannot be surrendered or changed so you lose access to the capital
The level of income payable will not reduce during your life regardless of changing interest rates Any additional 'options' included within the policy (e.g. a dependant's pension, etc.) will reduce the annuity rate available to you
Your dependant's benefits can provide additional financial protection for your family after you die  

Purchased Life Annuities

You pay a lump sum (from funds other than your pension fund) to an annuity provider in return for a guaranteed income for life.

The amount of each payment is determined at outset and can include various additional 'options' such as minimum payment period, dependant's pensions, index linking, etc.

Income payments receivable from the plan are taxable under the UK's PAYE system at your highest marginal rate of Income Tax.

Advantages Disadvantages
The basic rate of tax applicable to Purchased Life Annuity income is 20% Once established, the annuity cannot be surrendered or changed so you lose access to the capital
These annuities are treated differently for tax purposes than normal pension annuities (also known as 'Compulsory Purchase Annuities') because a significant part of each income payment is for income tax purposes considered as a 'return of capital', therefore a lower proportion of the income is taxable Any additional 'options' included on the policy (e.g. dependant's pension, index linking) will reduce the annuity rate available to you
A regular income for life  

The Company cannot accept any liability for the accuracy of the information above or clients reliance on it.

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