MONEY MAKEOVER

‘Will our £400,000 investments cover care costs in later life?’

left after their care is paid for, assuming they sold their home. They could spend this on themselves if they were not planning to leave an inheritance to anyone.

However, if one were to need care while the other remained in their home, this would change things.

As a couple, they have between £1,000 and £2,500 a month in excess income. This will be boosted to about £2,200 to £3,700 once both of their state pensions start to be paid. They should consider setting some of this aside as cash and could use the rest for their travel plans.

The couple should also put a lasting power of attorney in place to ensure that they can retain access to any joint savings or investments if one of them becomes incapacitated.

Jamie Smith

Adviser at Foster Denovo, a wealth planning firm: The Morleys’ primary option to pay for care is to use their current investments. It’s crucial that any money they set aside for care grows to keep pace with inflationary increases in the cost of care and they will need to take risk to achieve this.

They should consider holding more of their investments in cash or lowerrisk options to help protect them from having to sell them at a time when they have fallen in value – for example, if they suddenly had to go into care after a stock market crash.

An alternative would be to release equity from their home, although the fees for this can be high and it may not be a good idea if they have the money in investments to avoid it.

“Long-term care annuities” can be purchased if running out of funds is a concern, although that is not likely to be the case here. Pre-funded long-term care insurance plans are also available, but the level of cover has to be chosen at the outset and the Morleys will not get any money back if they do not need to claim on the policy.

They may be able to claim Attendance Allowance benefit if they develop a disability that means someone needs to look after them and they are paying for their own care, whether at home or in a care home. They should also get a care needs assessment to see if the council will contribute towards anything.

The couple could repay their £12,000 in debt using the £26,000 they have in cash and bonds. However, this might leave them with insufficient cash in case of an emergency. If it meant selling some of their investments, which may have fallen in value during the recent market downturn, they should consider waiting until the investments have recovered.

With interest rates currently so low, repaying the loan is not a priority and doing so early may incur a charge. Whatever they choose to do, the Morleys should consider switching their savings into higher-interest accounts to improve their returns.

Long-term care is a specialist area and anyone they approach for advice should hold a relevant qualification.

Lauren Davidson

Head of Personal Finance

Sam Brodbeck

Personal Finance Editor

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