Income Payment Options
Under the Immediate and Deferred Care Plans, clients may choose for income to be paid monthly or 4 weekly.
All income will be paid in advance.
Once selected, the income payment frequency cannot be changed.
Income under the Immediate Care Plan will normally start on the Plan Commencement Date, and income under the Deferred Care Plan will normally start on the chosen anniversary of the Plan Commencement Date.
However, clients may choose at outset a specific date in the month for income to be paid. In this case the first payment will be adjusted to take into account the period between the Plan Commencement Date (or the relevant anniversary of this) and the first income payment date.
Income will normally be paid directly to a Registered Care Provider, in which case it can currently be paid tax free. Payments to Local Authorities also qualify for relief. Clients can request for income to be paid to another party, or to themselves. However, income payments will then become subject tax, in line with the treatment of Purchased Life Annuities.
In this case, we may be required to deduct an element of tax at source, but the annuitant will be responsible for ensuring that they are ultimately paying the correct amount of tax.
Under current tax rules, in order to determine the tax to be deducted at source, we will establish the capital / interest content of each income payment and a form (PLA6) will be need to be completed, if not the whole amount is subjected to tax. This will be done in line with the underwriting and mortality assessments used at outset. We will then deduct basic rate tax at the Savings rate (currently 20%) from the interest portion of each payment.