While these agreements are not intended for long-term borrowing, if the client were to live for an extended period it is possible the equity in the property may be exhausted and negative equity created.
Equity release is also often cited as an option but the vast majority of these products need to be repaid when the person goes into care so they are not suitable for many residential care situations.
That said some people do choose to take out an equity release product to pay for domiciliary care so this can be an option if your client needs a relatively low level of ongoing support at home.
Occasionally, you find ‘sale and rent’ back schemes being mentioned with regards to paying for care – especially, if one partner is in a residential setting and the other has stayed in the family home.
The downsides, which can involve losing the home altogether, can be significant and with the Financial Conduct Authority investigating bad practice in this area, it would seem prudent to proceed cautiously when advising clients on these issues.
Long-term care advice
And there are an increasing number of intermediaries who are interested in providing long-term care advice as they recognise the markets growth potential. CF8 is required if an adviser is keen to operate in this market and those who are interested in finding out more should start by contacting Society of Later Life Advisers (Solla) or one of the other relevant membership organisations.
With a great many advisers building up long relationships with clients, gaining a care qualification can help them to provide an even more holistic approach to financial planning – and defuse the time bomb that the UK economy faces.
Stephen Lowe is group communications director at Just Retirement
