Planning for long-term care can be emotionally and financially challenging, particularly when families are navigating rising care fees, uncertainty around health, and making financial decisions on behalf of a loved one.
This was the situation faced by our client, Sally, and her family as her health began to decline and long-term care became a likely next step. Her children, George and Layla, wanted to ensure their mum was properly supported, both financially and in terms of care, while also creating a plan that would be sustainable over time.
After reviewing Sally’s circumstances, our Financial Consultant Oliver Tolman recommended an Immediate Needs Annuity to provide reassurance and structure. It offered sustainable contributions towards her ongoing care fees while creating greater financial certainty for both Sally and her children.
What was the client’s situation?
George and Layla first spoke to their Financial Consultant, Oliver Tolman, in late 2025, as they had been granted Power of Attorney for their mum, Sally. This allowed them to manage her financial affairs as her health had begun to decline.
At that stage, Sally was retired and living alone in her home, but it was clear that additional support would soon be required.
“In our initial meeting, George and Layla were understandably anxious. They knew care may soon become necessary for Sally, but there were still a lot of unknowns around what that would look like and how much it would cost.
The cost of care was a big concern for Sally, as she received a set monthly income from her pensions and didn’t want to have to drain her savings. This could impact her quality of life and the inheritance left for George and Layla.”
Oliver determined that Sally was in a relatively strong financial position, with:
- Cash savings.
- A defined benefit pension.
- State pension income.
- An inherited pension from her late spouse.
However, this financial position meant that she did not qualify for local authority support and would therefore need to self-fund her care arrangements.
Following this initial meeting, Oliver remained in contact with the family while care arrangements were being reviewed.
When the situation became more urgent
In early 2026, Sally moved into full-time residential care, and her home was sold to help fund her long-term care needs. This is when the financial challenge became much clearer to Oliver.
“The care home Sally moved into could provide the level of support she needed, but the fees were around £9,000 per month.
This was a concern as Sally’s existing income only covered approximately £4,000 per month, which left a monthly shortfall of £5,000.”
Initially, George and Layla were covering this gap using Sally’s savings, alongside some financial support of their own. However, concerns quickly arose around how sustainable this would remain over time.
“George and Layla were not just concerned about the shortfall today but about how this may compound over time, particularly as care fees tend to rise each year. They also had their own financial responsibilities to consider as well.
The family needed a solution that would help cover these costs, relieve some of the financial pressure that they were experiencing and provide peace of mind that Sally’s quality of life would be maintained.”
What was the solution?
After reviewing Sally’s situation in detail, Oliver recommended an Immediate Needs Annuity, which is a type of insurance designed to help cover long-term care costs.
“It works by using a one-off lump sum payment, which could be from cash savings, investments or other capital, to secure a guaranteed income for life. This income is typically paid directly to the registered care provider by the insurer.
As the payments are made directly to the registered care provider, they are typically paid free of income tax under current rules, which is an additional benefit of this type of policy.”
In Sally’s case:
- The lump sum came from a combination of her savings and the proceeds from selling her home, as it was no longer needed once she moved into care.
- The policy cost £142,000 and provided guaranteed payments towards her care fees for life.
- The payments covered the £5,000 shortfall almost in its entirety each month and the children used Sally’s savings to make up the small gap.
Why this approach worked for Sally and her family
“The Immediate Needs Annuity gave Sally, George and Layla reassurance, as it provided guaranteed contributions towards her care costs for life and reduced pressure on both Sally’s savings and her children’s finances.”
The policy included:
- Lifetime guaranteed payments.
- 5% annual escalation rate to help keep up with rising care fees.
- 50% capital protection.
From a tax and administration perspective, having payments sent directly to the care provider made things significantly simpler and more tax-efficient for the family.
Adding reassurance: Capital protection:
The family chose to include 50% capital protection for additional peace of mind.
This means that if Sally were to pass away earlier than expected, a portion of the original lump sum could still be returned to her estate.
“George and Layla wanted reassurance that some of their mum’s capital would still be preserved if the policy wasn’t used for as long as expected.
They selected the 50% option after reviewing the projected break-even point, which estimated that the total care payments received over two years would exceed the original £142,000 which paid for the policy.”
Planning for the future: Escalation rate:
To reflect rising care costs, George and Layla decided to include a 5% annual escalation rate in the policy. This means the income paid from the policy will increase by 5% each year.
“This helps reduce the risk of George and Layla needing to contribute more in the future, either from Sally’s savings or their own finances, as care fees increase.”
This formed part of Oliver’s broader strategy, which focused on long-term sustainability rather than simply covering immediate care costs.
What was the outcome for Sally and her family?
The Immediate Needs Annuity created a far more stable and predictable financial position for the whole family.
The key benefits included:
- Guaranteed contributions towards Sally’s care costs for life.
- Reduced pressure on her savings.
- Greater financial certainty for George and Layla.
- Tax-efficient payments made directly to the care provider.
- Minimal ongoing administration.
- Protection against rising care fees.
- Added reassurance through capital protection.
Most importantly:
“The arrangement removed a huge amount of uncertainty and allowed George and Layla to focus less on financial pressure and more on Sally’s wellbeing and quality of life.”
Are there any important considerations to an Immediate Needs Annuity?
While an Immediate Needs Annuity can be effective, it is not suitable for everyone.
They are:
- Medically underwritten (your quality of health may impact pricing).
- They require a significant upfront payment.
- They must be carefully matched to the client’s circumstances.
“With medically underwritten annuities, different insurers can offer varying outcomes, which is why reviewing the wider market is so important. As the policy requires a significant upfront payment, affordability and wider financial circumstances should also be carefully considered.
There is also the possibility that a client may die earlier than expected, meaning the full value of the annuity may not be realised, particularly where lower levels of capital protection are included.”
After reviewing these considerations with Oliver, George and Layla agreed that the annuity was the right approach for Sally.
Was there wider financial planning support?
Alongside arranging the annuity, Oliver continues to support the family with their broader financial planning.
“We wanted to ensure that Sally’s remaining capital continued to work effectively for her, rather than simply sitting in cash and potentially losing value over time.”
This included:
- Reviewing investment opportunities for Sally’s remaining capital.
- Discussing Inheritance Tax planning considerations for her estate.
- Maintaining accessible funds for discretionary spending and lifestyle costs.
- Planning for potential future increases in care requirements.
- Supporting George and Layla with their own personal finances.
What is the value of proactive later life financial planning?
This case highlights how later life financial planning often extends far beyond investments or Inheritance Tax planning alone. For many families, the priority is ensuring care arrangements remain sustainable, protect quality of life and reduce the financial pressure that long-term care costs can create over time.
In this case, Oliver’s proactive planning and tailored advice helped provide greater certainty around rising care fees while creating a more sustainable long-term solution for Sally and her children. The Immediate Needs Annuity allowed the family to focus less on the financial pressure surrounding care costs and more on Sally’s wellbeing.
This case demonstrates the value of seeking advice early, as proactive later life planning can help families better understand their options and approach future care decisions with confidence and clarity.
How can Cooper Associates Wealth Management help?
Supporting a loved one through later life can feel overwhelming, especially when it comes to financial decisions. Having the right plan in place can help make things feel more manageable.
If this case study feels relatable or has raised questions about your own situation, you are not alone and we are here to help.
If you would like to speak with one of our award-winning advisers, contact us today to book a fee-free, no-obligation meeting, where we can explore the options available to you and your loved ones and help you understand what might be right for your circumstances in a clear, straightforward way.
*The names used in this article have been changed to protect the anonymity of our clients.
