Investment Bonds and Care Cost Planning

To most of us, the idea of going into care is not an appealing one. Even less appealing is the thought of having to use your lifetime's work paying for the privilege. That makes it worth understanding how care is paid for, how the means test works and what you can and cannot legitimately do — and not just for those who expect to need care in the shorter term.

Planning here is about being prepared and making informed choices in good time. It is not about avoiding a fair contribution towards your care, and any planning has to stay firmly within the rules.

What is 'Deliberate Deprivation of Assets'?

In short, deliberate deprivation of assets is any action to intentionally decrease your overall assets in order to reduce the amount that you contribute towards the cost of care services provided by local authorities.

Important point: The local authority must prove that you knew that you may need care when the action was carried out. However, crucially, there is no time limit to be free of their scrutiny, meaning that any past action can be reviewed and questioned if deemed relevant.

So, What Can Be Done?

Firstly, planning in advance is key. It is no good waiting until care is needed, as this will leave you wide open to be challenged by the authorities.

There is one type of product that is often discussed in this context, because it can be flexible and allow you to retain access to your capital. It is worth stressing that it is not a way of side-stepping a care assessment.

Investment Bonds

What are they?

Investment bonds are investment products designed for those looking for medium to long-term growth and are willing to accept a degree of investment risk.

An investment bond works by paying an insurance company a lump sum, which they then invest. As part of the contract, the bond will offer a small amount of life insurance (usually 1% or less), meaning that if you die during the contract, they will pay out slightly more than the bond is actually worth.

Why might this matter for care planning?

Under current rules, when a local authority carries out a means test to assess how much you will pay towards care, certain insurance-based products are treated differently from ordinary savings. How any product is treated depends on the individual circumstances, the local authority's assessment and the reason it was taken out — and a local authority can still treat a product as deliberate deprivation where it decides the planning was done in anticipation of needing care.

Investment bonds are just one of a number of options available for care cost planning.

Care Cost Planning is Complex

Care planning involves complex rules around:

• Means testing
• Capital thresholds
• The timing of planning
• Tax implications
• Estate planning integration

This is why professional advice is so valuable. An adviser can:

• Help you understand your potential care cost liability
• Explore options that might suit your circumstances
• Ensure any planning complies with means testing rules
• Coordinate planning with your wider financial and estate plan
• Help you understand the implications

Getting Started

If you feel a discussion around care cost planning options would be useful, please contact us to arrange an initial consultation at your convenience.

Figures quoted are correct as at September 2026. Tax rules, allowances and thresholds can change.

Important: This article is for information only and does not constitute financial or legal advice. Care cost planning involves complex rules that vary by local authority and change periodically. The means testing process for social care is complex and depends on individual circumstances. Any planning involving gifting or deprivation of assets requires careful consideration to avoid falling foul of local authority scrutiny.

Before undertaking any care cost planning or making significant financial decisions related to care, please seek advice from a qualified financial adviser and solicitor who can review your full circumstances and provide specific guidance based on your situation.

For a confidential discussion about care cost planning, please get in touch.