New research from Safe Home Income Plans (SHIP), the trade body for equity release product providers, has found that those hoping to pay for care from income and savings typically face a 26% shortfall.

The analysis of data found an average cost of £51,906 to cover the typical two year stay in a residential care home. During that same period of time, the average over-55 would only receive £27,796 in income, leaving a shortfall of £24,110.

This shortfall is often covered using savings and investments. The research found that this can usually provide an additional £10,468 of funding, which continues to leave a shortfall of £13,642 for the typical stay in a residential home.

These figures exclude the cost of any specialist medical care or assistance. There are also massive regional differences in the figures, with the biggest average shortfalls identified in East Anglia and London.

The cost of residential care is highest in London and the South East, but these regions tend to have people with larger incomes and available assets to cover the cost of care. Whilst there are still substantial shortfalls in the South East, the gap between cost and wealth is wider elsewhere.

Every person needing care finds themselves in a different financial position. Whilst shortfalls are often inevitable when assessing the cost of care and available funding, it is essential to seek professional independent financial advice from a care fees planning specialist to make the most of your income and assets.

The survey, as part of a report looking at current attitudes towards retirement, asked 1,000 parents in the UK whether they had made a Will.

Based on a comparison with other nations, only parents in Canada were more likely to have written a Will.

The survey also found that nearly half of British couples with children did not have any life assurance in place.

Failure to plan ahead like this can result in dire consequences for families when one or both parents die.

Dying without a Will (known as dying intestate) can make the process of probate more complicated. It means your estate is divided up with reference to law of intestacy, rather than your wishes.

As we often have to remind clients, making a Will does not mean you are going to die!

November is Will Aid Month, where thousands of solicitors are offering to write your will in return for a charitable donation. The suggested minimum donation is £85 for a basic Will or £125 for a pair of basic mirror Wills.

You can find out more about Will Aid and find a participating solicitor at www.willaid.org.uk. Alternatively, speak to your Informed Choice Financial Planner to get a referral to a solicitor who is taking part in this initiative.

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The new ISA allowance, which will become available from 6th April 2012, is £600 higher than the current limit of £10,680 for 2011/12.

Individuals will be able to invest up to £11,280 into an investment ISA in the next tax year. Alternatively, they can invest up to £5,640 into a cash ISA with the remainder up to the total allowance of £11,280 available to invest in an investment ISA.

Increases to the ISA allowance, which are now based on the Consumer Prices Index (CPI) inflation figure for the year to the previous September, are rounded up to be easily divisible by 12. This makes it easier to calculate the monthly allowance, which will be £940 per month for 2012/13.

The higher ISA allowance represents good news for savers and investors who want to protect their returns from tax and aim to achieve a net return to keep pace with high levels of price inflation.

Would you like to meet with an Informed Choice Financial Planner to discuss the investment of your ISA portfolio? Get in touch to arrange an initial meeting at our expense, with no obligation.

Whilst he remains confident that the government will eventually implement his proposals, the timing of this implementation now looks likely to be delayed.

In order to put the Dilnot proposals in place, the government will need to secure the support of insurers. This will enable a pre-funded long term care market to develop, as one does not currently exist due to the risks associated with increased life expectancy.

If and when the Dilnot proposals are fully implemented, care fees will remain an expensive item of expenditure in later life.

Recent comments from Partnership, a provider of care fees products, warned that people are underestimating the cost of long-term care which is outside of the proposed £35,000 cap on fees proposed by Dilnot.

Based on the Dilnot model, a self-funded care home resident would still pay 90% of care costs, according to Partnership.

Another care provider, Bupa, has previously said that only 10% of care home residents would benefit financially from the Dilnot proposals.

The next step in this long and drawn out political programme of long-term care reform is a White Paper from the coalition government. This is expected to be published in the first half of next year.

When it comes to long-term care, the political agenda always seems to move very slowly.

Would you like to know more? Click here to get in touch and arrange a meeting with an Informed Choice Financial Planner.

The government is effectively reducing the level of savings that can be disregarded when looking at the care home fee means test by simply freezing the level at its current rate for the next two years.

They have no plans to review these limits until the autumn of 2012.

Inevitably, in the interim, this means more people will be dragged over the means test threshold and therefore having to self fund from whatever means they have.

Currently an individual owning reckonable assets above the £23,250 upper threshold (in England) will be forced to self fund until their assets fall below this level.

Traditionally this threshold has been increased annually to take into account inflation but the government has decided to hold ditch this approach as part of their austerity measures.

The real effect of this action is an effective cut to the threshold by up to 10%.

Around 100,000 people already receiving some form of care fund themselves and it is estimated that 20,000 sell their homes in order to do so. In view of this additional “cut” it is likely that even more will need to sell up in the future.

In an increasingly litigious society, awards are becoming more commonplace and are growing in value.

Some of the highest value awards tend to involve medical negligence and by the nature of the circumstances giving rise to such awards, claimants may need some form of long term care.

Using a “PIT “ can bring many benefits.

Besides the normal protections using a Trust can add to a situation, one of the most compelling features of a “PIT” is the disregard from means testing by the Benefits Agency.

This means that by placing the compensation sum into such a trust, eligibility for income support, housing benefit and ancillary benefits can be preserved. This can have a massive impact on an individual’s finances over time.

Trusts can be complex and expensive to set up and run but at the same time, a PIT can bring significant benefits .

Every claimant’s requirements and expectations will be unique to their situation but it is clear that in most personal injury cases where compensation is likely to be sizeable, thought should be given to the validity of using a PIT.

Advice from suitably qualified legal and financial advisers should be sought ideally at the negotiation stage of the award process, but in any event at least before the award is settled.

CGT rates increased in the June Budget from a flat 18% of gains to either 18% or 28% depending on what tax rate an individual is liable for on income .

The tax system is complex and confusing but there are many planning strategies that can be employed to reduce CGT liabilities and ensure better use of the capital gains tax allowances available.

These include selling assets and buying them back within an ISA “bed and ISA ” or even “bed and spouse”; a tactic whereby assets are sold and bought back immediately by a spouse.

Clearly a “buy and hold” strategy can be a costly exercise when assets are eventually realised if gains have not been managed efficiently along the way.

Good professional advice can add serious value in reduced tax alone but can also help you to navigate the complexities of the UK tax system.

Is it time to review your investments?

Angela Murfitt | Profile | Other Posts

Angela is a Chartered Financial Planner providing independent financial advice to clients in the Staffordshire, South Cheshire and surrounding areas.

The protection for these payments could be secured by using life assurance which would pay out for a known period of time, providing an income or a lump sum should the ex-spouse die or become critically ill.

Such a policy could be taken out by the ex-spouse on their own life as part of the settlement although it would be sensible for the person receiving the maintenance to actually take over making the premium payments to ensure that the policy does not lapse without their knowledge should the payer stop making contributions to it!

If there is no such policy in place and the ex-spouse should die then, there could be a claim on their estate for the continuation of any unmade payments. This is hardly an ideal situation for either party and likely to be a fairly long process to arrange if it came down to it.

The good news is that life assurance is fairly cheap in the scheme of things provided the person to be insured is in reasonable health.

A Financial Planner will be able to calculate an appropriate level of cover with relevant additional benefits if necessary. There is no excuse then for not dealing with this important detail.

A Financial Planner can assist with providing information in divorce in many areas not least being able to review financial information already gathered from your providers to identify errors and omissions (oh yes it happens a lot!) to ensure that your finances are accurately represented and that those of the other side are also fairly represented.

Some assets could have hidden value – for example long standing endowment policies which may be saleable for additional value rather than simply accepting a lower surrender value or perhaps waiting for a particular window to encash an investment to avoid penalties on surrender.

As you would expect, your Financial Planner should be able to advise what borrowing capability might be should loans need to be raised or further advances on mortgages arranged and possibly signpost you to the most appropriate lenders for the purpose.

From a practical point of view there are often many ways of achieving a separation of assets but from a financial and risk point of view, it is worth considering the effect of legally transferring assets using assignments or trusts.

A very important discussion regarding the risks involved in any settlement options in the context of your new situation should you wish to retain or indeed get allocated certain investments is imperative.

This will ensure that going forward you are comfortable with the risks you are taking on in various scenarios.

Finally, a significant area where specialist advice is absolutely essential is pensions. Pensions are often played down in settlements and sometimes ignored completely due to complexity, but nevertheless are generally an asset well worth proper investigation.

Financial planners need to hold specialist qualifications to be able to advise in this area due to it’s risks and knowledge required.

This will involve detailing their assets, what they are and how much they are worth, as well as their liabilities; what they are and what is owed.

Sounds simple enough.

Practically when one household suddenly splits two are generally created. This can mean that often the same income has to fund both households – especially if there are children involved as the financial needs of the children have to be supported.

This could result in two mortgages or even a sale of the family home if both incomes were necessary to support borrowings and this can no longer be continued.

A Financial Planner can work with a couple to determine their likely budgetary requirements and can use cashflow models to look at how assets and income could be split between the couple to the best effect and over what period of time.

For example, looking at the dependency years of their children and how the higher income needs could be met over a discrete period of time etc. Undergoing this exercise can bring massive value to the mediation process.

Where assets are abundant the outcome might be very obvious and assets can easily be transferred between the parties without detrimental lifestyle effect on either.

In many cases however, finances these days are complex and the Financial Planner can work through the issues looking at how the budgetary requirements could be met by a fair and effective separation of assets or even a compromise.