Deferred payment agreements
The right to a Deferred Payment Agreement in England was introduced by the Government in 2015. Similar arrangements exist in Scotland and Wales. In Northern Ireland, there is no formal deferred payment system, but it might still be available, your client can contact their Health and Social Care Trust View - Health and Social Care Trust.
If your client is moving into a care home and most of their money is tied up in their home, your client’s local authority might offer them a DPA, which is a long-term loan. It means the local authority will help to pay the care costs until the property is sold or the homeowner dies. At this point, the loan is repaid. The local authority must be paid within 90 days of the date of death or the date the property or asset is sold or disposed, whichever is sooner.
The Disposable Income Allowance
Anyone entering a DPA is still allowed to keep some income to pay for any costs they may incur maintaining the home. This is called the Disposable Income Allowance (DIA) and is set at £144 a week.
What is the criteria for qualifying?
Eligibility for a deferred payment agreement (DPA) varies across the UK. In England, the qualifying conditions for a person applying are:
- Receiving long-term care in a care home or soon will be.
- Financially assessed as having less than £23,250 in savings, other than their property or pension pot.
- A homeowner or have another asset the local authority can use as security.
Typically, your client can’t use more than 70% - 80% of the value of their home to pay for fees.The local authority will take any pension income and certain benefits towards the cost of care into account before calculating the shortfall. The local authority should also ignore the value of any property for the first 12 weeks and help with funding during this period, so the agreement usually begins when someone has been in a care home for 12 weeks or more.
A legal agreement will be put in place with the local authority and they'll usually put a legal charge on the property to ensure the money owed in care fees will be repaid.
What are the cost?
The local authority can charge interest on DPAs. The Government sets the maximum interest rate that local authorities are allowed to charge. This is reviewed every six months. The maximum rate for England from July 2023 was 3.43%. Local authorities can also include additional set-up and administration fees.
Who might this be suitable for?
Someone who has savings and capital less than a certain amount, in England this is £23,250. Funding arrangements are different in Scotland, Wales and Northern Ireland, so your client should check with their local authority.
It may be suitable if your client doesn’t have enough money to pay their care home fees or are finding it difficult to sell their home, or they don’t wish to sell their home.
How can your client apply?
Your clients can contact their local authority to find out if they are eligible for the deferred payment scheme.
Advantages and disadvantages
- Your client doesn't have to find the money straight away to pay for care.
- Property price values may increase in the future.
- Your client may still be able to claim benefits such as Attendance Allowance if they’re entitled to them.
- Your client could rent the property. The local authority has to agree to this and could potentially place one of their tenants into the property. It could also affect any means-tested benefits being paid.
- Ongoing maintenance of the property.
- Your client may need to continue to pay bills such as water, gas, electricity and home insurance.
- House prices could fall, leaving your client with less money to pay back the fees.
- Not accruing the interest that could be achieved by selling the property and putting the capital into savings or investments.
More about care funding
Find out more information from care funding resources.
Useful sites
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