Government's £72k care home costs cap prompts retirement firm's move into long-term social care market

By Adam Uren

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A retirement specialists has announced it is developing a product to help the nation's elderly handle the hefty costs of long-term care, in response to the Government's plans to limit charges to £72,000 per person.

Enhanced annuities provider Just Retirement revealed it will be making a move into the long-term care market today, as it announced its third quarter results.

Although details of the product are spares at this stage, chief executive Rodney Cook has suggested in the first instance it will take the form of an immediate needs annuity, which sees long-term care part-funded by annuity income that is paid directly to care home providers free of tax.

Care home cap: The £72,000 limit on care home costs has prompted Just Retirement to enter the long-term care market.

Care home cap: The £72,000 limit on care home costs has prompted Just Retirement to enter the long-term care market.

Mr Cook said: 'I am pleased to announce Just Retirement will be entering the long-term care market during the next few months, initially with an immediate needs annuity solution. Further details will be published before the launch date.'

The Government earlier this year brought forward legislation to limit the costs of long-term care for the elderly, after growing concern over the number of people being forced to sell their homes to meet care home costs.

 

From 2016, the maximum an individual will have to spend on care will be limited to £72,000, while those with assets worth less than £118,000 will qualify for government help with the costs.

Just Retirement's announcement came as it revealed annuity sales for the first three months of 2013 had slumped to £230.6million, down 26.4 per cent on the £313.2million made in the same period last year.

However, this downturn reflects the impact of the EU gender equality directive that was enacted in December, as well as the Retail Distribution Review (RDR) that prevents financial advisers charging commission on sales, which came into force in January.

The EU gender directive meant that insurers could no longer discriminate between sex when selling annuities, which resulted in annuity rates for women rising and for men dropping, as men previously got a higher rate due to their shorter life expectancy.

The pending introduction of these two new regulations meant that there was a flurry of annuity sales during the second quarter up to the end of December, when Just Retirement's sales rose 64.3 per cent to £412.5million compared to a year before.

Total group sales for the nine months until the end of March stood at just under £1.25billion, a rise of 20 per cent on last year.

Of this figure, its equity release sales rose slightly in the third quarter by 1.7 per cent to £69.8million.

 

Mr Cook said: 'Just Retirement maintained a leading position in the individually underwritten annuity market with annuity sales of £230.6million during the quarter.

'Feedback we have received from intermediaries suggests the reduction in the third quarter is representative of the total intermediated market.'

Just Retirement is one of the largest providers of annuities on the open market, with 99 per cent of their customers referred by financial advisers.

Its core business is enhanced annuities, which give pensioners higher returns on their retirement savings as its products taken into account medical conditions and lifestyle choices which shorten life expectancy.

The comments below have not been moderated.

Is anyone daft enough to believe that the £72,000 cap will ever be implemented? We've heard it all before

Click to rate     Rating   10

And after the 72K, just for those foolish enough to be prudent, who pays for the free lunch?

Click to rate     Rating   12
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