Page 16 - CPB March 21st

Right to unwind The Care Property Bond
Should the Care Property Bond be compared with equity release products?
Why choose an annuity?
The customer has the right to terminate the Care Property Bond it if their health improves substantially and they are assessed by doctors and/or their care advisers as no longer needing residential care. The monthly payments from the Care Property Bond would stop and their property would be transferred back to them at a price equal to the outstanding mortgage debt, together with any associated tax, charges and expenses of Shaw Insurance Group. Any remaining cash set aside to pay the annuity would be used to pay down the mortgage debt.
Not directly. Most equity release or lifetime mortgages require for the immediate repayment of the loan upon the customer entering a care home.
The nature of the lending also differs from the Care Property Bond because typically with an equity release mortgage, a customer cannot make any repayments. Instead, similarly to a deferred purchase agreement, any interest due under this arrangement is payable at the end of the mortgage along with the original amount borrowed. The customer would also have to pay interest on an unpaid accumulated interest. Depending on the level of interest charged on an equity release mortgage, it is possible that the amount of interest due could double in size every six to eight years.
If there is an existing equity release loan on a property, it may be possible depending on the circumstances to use the Care Property Bond to pay off the equity
release lender and to re-finance the borrowing through the Care Property Bond.
The intention under the Care Property Bond is to service the interest on the mortgage debt and other outgoings associated with the property from the rental income. This feature is what keeps alive the possibility of passing on the property to the next customer’s next generation.
Pension annuities may not have a terrific reputation, but annuities as a whole have the solid virtue to provide the certainty that monthly payments will be made by an insurance company for the life of the customer.
A care annuity, which forms the basis of the Care Property Bond, is not subject to any UK income or other taxes and is paid on a monthly basis to a registered care home. Please note that tax legislation is subject to change.
The Care Property Bond primarily provides an annuity for life. It is financed by the transfer of a property to the Shaw Insurance Group which will mortgage and let out the property. The Care Property Bond also provides a mechanism to pass on the right to the remaining net equity in the property to the customer’s estate taking into account the accumulated mortgage debt, costs and charges. Unlike a normal annuity, it has material value after the customer has died. The value of the net equity passed on to the estate depends on many factors including the value of the property, the amount of the set-up costs, and the total amount of the monthly annuity payments made by Shaw Insurance to a care home provider.