My mother is becoming increasingly frail and we’ve decided that it is time for her to move into a care home, and she agrees.  She has a personal pension and a number of investments so we know she won’t qualify for state help with the fees.  How does she go about using her assets to generate the extra income needed?

Carl responds

This is a subject that we discuss with clients on a regular basis:  there are a number of different approaches your mother could adopt.  Finding the right mix to meet care fees would best be achieved through a lengthy and detailed discussion with a Chartered Financial Planner, but here are a few thoughts.

Firstly, your mother’s investment portfolio could perhaps be adjusted to alter the balance between income and investment growth.  If additional income can be generated, this could help to fill the shortfall.

Secondly, it may be beneficial to review the way that your mother takes her personal pension.  If she is, for example, using income drawdown then it may be possible and feasible to increase the amount she takes, although it would be important to plan this carefully so that she doesn’t completely deplete her pension savings.  If she has taken out an annuity (a guaranteed income for life) or has a scheme pension, she may be locked into the amount she receives each month and so need to look elsewhere for her additional income.

There are special care fee annuities – known as immediate care plans – which can be purchased for a capital amount but which will provide a top-up to income for life.  These can be set up to increase with inflation and can be particularly tax-efficient as they are generally paid direct to the Care Home.

If she is currently living in her own home, you may want to consider selling the house to generate additional capital to provide either an annuity or investment income – or indeed to retain it and rent it out to provide an income.  Do bear in mind, though, that any income you generate through rents would be counted as your mother’s income for tax purposes.

Do get advice at this critical time to ensure that your mother can enjoy the care she needs for the rest of her life and still have the satisfaction of leaving an inheritance for her heirs.  A Chartered Financial Planner will use tools such as lifetime cashflow planning to project the impact care fees will have on her eventual estate.

Any opinions expressed in this article do not constitute advice.  The value of an investment and the income from it could go down as well as up.  The return at the end of the investment period is not guaranteed and you may get back less than you originally invested.