Investment bonds have been a bit out of fashion recent years. However when it comes to care home fees Investment bonds could be a winner. They represent an asset that does NOT have to be disclosed.
Paragraph 33 of Annex B of the Guidance https://www.gov.uk/government/publications/care-act-statutory-guidance/care-and-support-statutory-guidance makes it clear that the surrender value of any life insurance policy must be disregarded as capital (provided there has not been deliberate deprivation – actively evading your liability is a criminal offence). Further information is provided in paragraphs 53 and 54 and Local Authorities may have to take legal advice to ascertain the complexity of such an investment and the qualification or not for disregard. Single premium investment bonds should be treated as policies of life insurance for these purposes. It should be noted that investment bonds that have no element of life cover, such as capital redemption bonds, would not be disregarded and their full surrender value would be included as capital.
The treatment of investment bonds is completely different with the treatment of other investments and savings. The values of investments like OEICs and property will always be categorised as capital, notwithstanding the main property where there is the potential for a disregard to be in place dependent on circumstances.
Using investment bonds prior to the need for care could put the customer into the box seat for choosing where to spend their money. If NHS funding is available or the client and their family decide it is more desirable to pay for care – then the option is available. The taxation structure of the bond is complex, but generally favourable, especially if the investor can use accumulated 5% allowances.
It is also instructive to note in paragraph 33 of the link above that any personal possessions such as paintings or antiques should also be disregarded. Unless purchased in order to reduce the exposure to care and support charges that little Velazquez tucked into the corner wall will remain in place – although the IHT man will have his call on that one at death.