Deferred payment agreements

In 2015 deferred payment agreements (DPAs) were introduced by the Government, its intended to ensure that people weren't forced to sell their home to pay for their care home bills1. In Northern Ireland, there is no formal deferred payment system, but it might still be available, your client can contact their View - Health and Social Care Trust.

Someone who can’t pay their long-term care fees can apply for a DPA, which is a long-term loan from their local authority that is secured against their home. 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:

  1. Receiving long-term care in a care home or soon will be.
  2. Financially assessed as having less than £23,250 in savings, other than their property or pension pot.
  3. A homeowner of a property that isn’t occupied by a spouse, partner, dependent child or a relative aged over 60, or someone who is sick or disabled.

Your client can't usually use more than 90% of the value of their home, though many local authorities set a lower limit between 70% and 80%. 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 is the cost?

The local authority can charge interest on DPAs. The Government sets the maximum interest rate that local authorities are allowed to charge. The maximum rate was 1.45% for 1 July – 31 December 20192. 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 can carry on claiming Attendance Allowance, Disability Living Allowance (care component) or Personal Independence Payment (daily living component).
  • 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.
  • Not accruing the interest that could be achieved by selling the property and putting the capital into savings or investments. 
  • House prices could fall leaving your client with less money to pay back the fees.

More about care funding

Find out more information from care funding resources.

Useful sites

We've selected a range of articles and further information on deferred payment agreements.

Our sources

1 View - Gov.uk 

2 View - Which? 

View - Money Advice Service 

Information researched and accurate as of February 2020. Not to be relied upon by advisers or their clients.