Margaret - Example Scenario Two

Our aim is to preserve your capital!

Margaret was a widow aged 87. Following the death of her husband in 1997, she moved to a small sheltered apartment. A few years later she and her family decided she could no longer live on her own and Margaret decided to move into residential care. The apartment was subsequently sold and raised £100,000.

As a retired teacher, Margaret received a teachers occupational pension. When this was added to her state pension and attendance allowance, she had total income of around £15,000 per year. The residential care home fees were £750 per week (£39,000 per year). This was a relatively expensive care home, but the family wanted Margaret to have the best possible care in the best environment – they were prepared to sacrifice any possible inheritance knowing that their Mother was in a home that she liked and in which she felt comfortable. However, this meant that she had an income “shortfall” of around £24,000 per year.

After consulting us and considering all options Margaret’s son agreed to purchase an immediate needs annuity for £35,000. Due to Margaret’s age and health she received a relatively high annuity rate which meant that the annuity provided £12,250 per year. The nnuity did not cover the full shortfall and we needed to find a further £11,750 per annum in order to pay the costs. However, we still had £65,000 of capital available which we could use to supplement her income.

The family then decided to buy a “deferred” annuity. For a one-off premium of £5,000 this provided an income of £9,000 per year (payable monthly) after a deferred period of 36 months. It was almost like taking out a life assurance to protect their Mother from having to be moved to a cheaper care home should other funds be depleted. And she should have around £28,000 left over.

In summary, there are many things that can be done depending on the client’s circumstances – we will tailor a portfolio to protect as much capital as possible.