PPP lifetime care is launching a long term care policy that will aim to help clients protect their as...
The single premium product, called the Lifetime Care Asset Protection Bond, aims to ensure that clients will not need to use any further assets or savings should they need long term care. The plan also includes a death benefit.
Michael Whittaker, long term care product development manager at PPP lifetime care, said: "The investment aims to be repaid when the investor dies, so it can be passed on to their family free of inheritance tax and the IHT bill is reduced by up to 40% of the investment."
The plan works by splitting up the single premium into two parts, one of which is invested into the PPP lifetime care plan to ensure all care costs can be met while the second part is invested in the AXA Sun Life Flexible Bond with life cover to provide a death benefit.
The size of the death benefit is the greater of 101% of the bond's value or the total of the original investment.
The return on the investment is dependent on 6% growth a year prior to management charges and is pitched in line with the PIA's middle band growth assumptions.
Whittaker said: "If there is less than 6% growth we would suggest life cover is reduced, but on the other hand, if growth is above 6% clients can draw down the surplus or increase their life cover subject to medical evidence."
The policy is the first product venture between PPP and its new parent AXA. Clients have a choice of 18 funds including a unitised with-profits fund and a deferred distribution fund, which will be managed by PPP's sister company AXA Sun Life.
Under the plan, all benefits are guaranteed for clients aged 60 or over when the policy is arranged, all benefits are tax-free whether paid as income or direct to the care provider and the full LTC benefit is paid for every claim.
"If the client has a monthly benefit of £1,000 but the care services only amount to £700 the balance in cash is theirs to do as they see fit. For example, the surplus can be used for any additional maintenance costs that may result, heating or perhaps to pay an informal carer," Whittaker said.
A male aged 60 would pay a premium of £16,816 for Select cover (failure of three ADLs or mental impairment) with RPI indexation while a female would pay £26,443 for the same benefit. If level benefits are selected this falls to £11,182 for a male and £13,996 for a female.
But with care costs averaging £19,000 a year and escalating to much higher levels in the South East and London, it is a worthwhile investment, particularly with the security of the death benefit.
"A house is usually a person's biggest asset and they like to pass it on, so they need to look at ways they can protect it," he said.
Since the Royal Commission reported, 46,000 homes have been sold to fund care and 111,000 people have needed care for the first time.
