Deferred payment agreements

In 2015 Universal Deferred Payment Agreements (DPAs) were introduced by the Government, ensuring that people weren't forced to sell their home to pay for their care home bills.1

Someone who can’t pay their long-term care fees can apply for a DPA, which is a loan from their local authority that is secured against their home. It means the local authority will 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 of disposal of the asset, whichever is sooner. 

A local authority cannot refuse a DPA to an individual who meets all of the criteria.

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 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 the value of the property.
  3. A homeowner in a property that isn’t occupied by a spouse, partner, child or a relative aged 60 or over.

There is a maximum value of 90% of the value of the 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 and the local authority will put a legal charge on the property. The DPA can be repaid early, subject to the local authority receiving notice in writing and paying the DPA amount and any interest and administration costs.

What is the cost?

The local authority can charge fees to cover the costs of setting up the DPA and interest charges can also be applied. There are controls on the maximum amount that can be charged. The maximum rate was 1.65% for 1 January to 30 June 20192. Local authorities can also include additional set-up and administration fees.

Who might this be suitable for?

Someone who has less than £23,250 and has a property they don’t want to sell, without debt secured against it.  

How can your client apply?

If your client is admitted to a residential or nursing home permanently following a social care assessment, your client will be written to with details of how to join the scheme on completion of the financial assessment.

PDF file: Care Fees Plan Questionnaire PDF size: 811KB  

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 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.
  • Continuing to pay bills such as water, gas, electricity and home insurance.
  • Not accruing the interest that could be achieved by selling the property and investing the funds. 

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

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2 View - Which? 

View - Money Advice Service 

Information researched and accurate 21 June 2019. Not to be relied upon by advisers or their clients.