SCOTTISH AMERICAN INVESTMENT COMPANY
/ PLATFORMS /
A ROUGH CALCULATION
providers, which may seek to
exploit clients who can pay more
once their home is included in the
calculation of savings and wealth.
THE SERIOUS ILLNESS
LOTTERY
What is clear is that a policy that
seizes assets above £100,000 of
those unlucky enough to lose out
in the serious illness lottery is
likely to draw criticism.
Someone with dementia who
stays at home or enters residential
care could find that their suffering
is multiplied by state charges of
between £200,000 and £300,000
after a four- or five-year stay.
Sir Andrew Dilnot’s 2011 report
suggested a £35,000 cap on care
charges. His plan encouraged
individuals to save towards the
cost of long-term care, but the
government scrapped it, believing
it would be difficult to persuade
people to put money aside for this
purpose as well as a pension.
Those who suffer the most
debilitating long-term illnesses will
lose the most from May’s initiative
while those who win in the health
lottery will win big, especially as
the inheritance tax threshold for
couples is due to rise to £1m.
So, what should you do? My
advice would be to save for the
worst possible scenario and if you
don’t suffer a debilitating illness
requiring long-term care, then you
can keep going on those holidays,
eating out and playing golf.
Let’s assume that you need to
26
“A policy that
seizes assets
above £100,000
of those unlucky
enough to lose
the serious
illness lottery
is likely to draw
criticism”
save enough money to pay for
long-term care at some point in
your retirement and that you need
enough of a pension pot to last you
until the age of 90.
You’d need a monthly income
of around £6,150 before tax to
fund a £50,000 per annum long-
term care bill (assuming £50,000
p.a. care costs and £10,000 p.a.
additional living costs excluding
state pension and tax as the latter
depends on a) your personal
circumstances and b) how long-
term care is taxed – but you still
need to account for this).
To generate this level of
income, you will need a pension
pot at retirement of £1,070,000
(calculated using the Trustnet
Direct Retirement Planner).
This will deliver an income of
£6,150 per month – or £73,800 per
annum – until you reach 90 years
old, assuming the pot will continue
to grow at 5 per cent per annum
through retirement.
If you want to insulate yourself
from the punitive costs of long-
term care, you can take matters
into your own hands and plan
ahead, consider long-term care
insurance or take your chances
that you might not need any care
at all. Of course, if you have a
partner, the risks multiply that one
of you will need care at some point,
so best make at least some effort to
save for all eventualities. You can
then hedge against the likelihood
that the government won’t plunder
your savings and house to cover
the cost of care in old age.
AGE AT WHICH YOUR PENSION POT WILL RUN OUT
£1200K
SAINTS’ CORE BELIEF IS
THAT INCOME, GROWTH
AND DEPENDABILITY
MAKE A POWERFUL
COMBINATION.
AGAIN AND AGAIN.
SAINTS (The Scottish American Investment Company) was founded way back in 1873 to invest in
American railways but these days aims to deliver dividend growth ahead of any rise in infl ation, mainly
from a portfolio of global equities, though investments are also made in bonds and property. The Trust,
which is managed by Baillie Gifford, seeks out attractive, quality companies which offer long-term
growth potential rather than merely providing a high yield. SAINTS pays out a regular dividend
every quarter. It has successfully grown its dividend every year for 37 years – over the last 10 years
SAINTS has increased its dividend by 46% compared to a 25% rise in the Consumer Price Index.*
5%
£1050K
£900K
£750K
£600K
Total dividend per ordinary share
(net) – pence per share*
£450K
£300K
£150K
2012 2013 2014 2015 2016
9.8 10.2 10.5 10.7 10.825
Past performance is not a guide to future returns.
£0K
65
69
73
77
81
85
89
93
69
Please remember that changing stock market conditions and currency exchange rates
will affect the value of your investment in the fund and any income from it. The level
of income is not guaranteed and you may not get back the amount invested.
For an investment that aims to beat infl ation over the medium
to long term, call 0800 917 2112 or visit www.saints-it.com
Middle rate 5% 90
Assumes monthly drawdown of £6,150 and 5% annual growth
Source: FE Analytics
trustnetdirect.com
Long-term investment partners
*Source: Baillie Gifford & Co, data as at 31 December 2016. Your call may be recorded for training or monitoring purposes. The Scottish American
Investment Company P.L.C. is available through the Baillie Gifford Investment Trust Share Plan and the Investment Trust ISA, which are managed by
Baillie Gifford Savings Management Limited (BGSM). BGSM is an affi liate of Baillie Gifford & Co Limited, which is the manager and secretary of The
Scottish American Investment Company P.L.C.