Deferred payment agreement

What is a deferred payment agreement?  Back to top

A deferred payment agreement (DPA) is an agreement with us which could help you to use the value of your home to fund residential care costs.

First 12-weeks

For the first 12-weeks of your permanent admission to a residential or nursing care home the value of your main property is not taken into account and you may be able to receive additional financial support from us. This is known as the 12-week property disregard period.

You will pay a weekly contribution towards your care from your income and other savings. This is worked out by an assessment of your finances and is called your assessed weekly charge. This will apply if you do not have other financial resources of more than £23,250, such as savings, shares or another property.

After 12-weeks

At the end of the 12-week property disregard period, your main property will be included in your financial assessment and you will be assessed as having to pay the full cost of your residential or nursing care. 

You may be eligible for a deferred payment agreement if you are assessed by us as having to pay the full cost of your residential or nursing care but you are unable to pay the full weekly charge because your capital is tied up in your property. We will then pay the difference between your assessed weekly contribution and the actual cost of your care in a residential or nursing care home. This amount paid by us becomes the deferred payment.

Benefits of a deferred payment agreement  Back to top

Some of the benefits are:

• you will not be forced to sell your home
• you could rent out your home and create some income for yourself which would reduce the amount you had to pay us back when the house was sold

• you might be entitled to claim some benefits which you could use towards your charges
• if there is an existing agreement for a third party 'top-up', where a family member or other person puts additional money towards your placement, and you decide to take advantage of the deferred payments agreement. You can add the cost of the top-up payments (after the 12-week property disregard period has ended) to your deferred payments agreement loan, if we agree there is enough equity in your home. The deferred payment is currently, according to government rules, the only way of paying any agreed top-up yourself without depending on a third party

Top-ups

A top-up agreement is required where a potential resident of a care home or their representative has expressed a preference for a care home whose fees are more than the personal budget set by us that is able to meet the assessed care needs of the individual.

The person who contributes the top-up payment is known as the 'sponsor'. If a top-up is agreed, the sponsor is required to make the weekly payment for the duration of the care home placement directly to the care home.

In the event of the payment of a top-up is not maintained, We may arrange for the resident to be moved to an alternative care home who can meet the needs of the individual and where fees do not exceed the personal budget value.

Am I eligible for a deferred payment agreement?  Back to top

Usually you will need to meet the following criteria to qualify:

• your needs are being met in a care home, or in some cases supported living accommodation, and you have been assessed as having eligible needs which that should be met through a care home placement
• you have no more than £23,250 in assets (i.e. in savings and other non-housing assets) excluding the value of your home
• you must own or have part legal ownership of the property, which is not benefitting from a property disregard. For example is not occupied by a spouse or dependent relative as defined in our charging policy. Your property must be insured (if it is not, you must arrange for it to be insured at your own expense)  
• you must allow us to have the first legal charge on your property. There can be no other beneficial interests on the property, for example outstanding mortgages or equity release schemes.
• you must have mental capacity to consent to a deferred payment agreement or have a legally appointed representative willing to do this for you
• you must ensure the property is registered with the Land Registry. If it is not then you must arrange for this to be done at your own expense

Whilst in the agreement you will also need to:

• have a responsible person willing and able to ensure that necessary maintenance is carried out on the property to retain its value; you are liable for any such expenses
• insure your property at your expense
• pay your contribution regularly and on time. If you do not, we retain the right to add this debt to the loan amount
• ensure there are no other beneficial interests on the property, for example outstanding mortgages or equity release schemes, unless this is approved by us

How will having a deferred payment affect my income and benefit entitlement?  Back to top

Attendance Allowance

If you are in receipt of attendance allowance, the Attendance Allowance Unit will suspend payment after you have received 28 days of financial assistance from the county council towards your care, which can be in either a care home or hospital setting.

Reinstating your attendance allowance

When the 12-week property disregard period ends you should be entitled to receive attendance allowance again. This is because you are then considered to be paying the full cost of your eligible care needs or accommodation, even if you will be doing this is by deferring some of the charges.

To confirm that your Attendance Allowance will be re-instated call the Attendance Allowance Unit:

• 0800 731 0122

Applying for higher rate attendance allowance

If you were only receiving the lower rate of attendance allowance before your permanent move to a residential or nursing home and have been assessed as needing assistance at night you should be due the higher rate weekly payment. You can contact the Attendance Allowance Unit on the number above to apply for the higher rate.

Applying for attendance allowance

If you have not previously applied for Attendance Allowance you can request an application form:

• on the Direct Gov website
• by contacting the Attendance Allowance Unit on 0800 731 0122.

Pension Credit

If you have been in receipt of pension credit there are circumstances where you may be entitled to continue to receive this again after the initial disregard period has ended and once attendance allowance has started again.

This would be on a temporary basis pending the sale of your former home and the sale proceeds being available to you. If you choose not to sell your home straight away, your entitlement to Pension Credit is likely to stop altogether.

Call the pension service o confirm whether you are eligible for this benefit:

• 0800 731 0469

The key information that the pension service will need from you is:

• details of any period(s) of hospital admissions that occurred in the months prior to you moving to the care home
• confirmation of the date that you moved to the care home
• confirmation of the date you started to receive financial assistance from us
• confirmation of the date that you will be responsible for the full cost of care (the date your property will be included in your financial assessment)
• whether you are intending to sell or rent or keep your former home

Can a deferred payment agreement be refused?  Back to top

We can refuse a request for a deferred payment. In such circumstances the decision will be notified in writing to the applicant and/or their personal representative. The decision will set out the grounds for refusal and provide for appeal rights. For information on circumstances which may potentially lead to such a refusal, see the eligibility page.

There may be circumstances where it is not possible to put a deferred payment agreement in place even if you qualify under the eligibility criteria, for example:

• where we are unable to secure future payment of the costs against the property or asset which is the proposed security
• the property or asset being used as the proposed security is uninsurable
• where you want to defer costs which are more than the property or asset is worth
• where you do not agree to the terms and conditions of the agreement
• if you are unable to make your own decisions and do not have a power of attorney in place for someone to act on your behalf

There may also be circumstances when we may decide not to defer further charges for you under the deferred payment agreement, although this does not allow us to demand repayment in such circumstances.

What types of security are required to enable me to have deferred payment agreement?  Back to top

We must ensure adequate security is in place when deciding whether a person is entitled to a deferred payment. The onus is on the person (or their representative) to provide evidence of the security.

We offer two versions of deferred payment agreement:

• a full DPA where the debt has built up is secured against the person’s property. We will accept a first legal mortgage charge as adequate security if the person is eligible
• a short-term DPA if the person’s property is for sale, we can provide a short-term arrangement for meeting care home fees based on an undertaking signed by a solicitor guaranteeing to pay the amount owed to the council when the sale is completed

In addition to a first charge and the short-term DPA, we will consider alternative security for a DPA and associated interest. We have full discretion whether we will accept this.

Examples

This list below provides examples but is not exhaustive:

• third party guarantor
• second legal charge
• life assurance policy
• leasehold properties

Unacceptable security

Alternative security which will not be accepted by us for a DPA includes:

• mobile home
• equity release scheme or lifetime mortgages
• property abroad

Where we agree that the person may rent out their property we will treat the net rental income, (i.e. allowing for management fees and estimates of income tax) as additional income in the person's financial assessment.

We will revalue or require a revaluation of any security we are holding every two years to ensure that the DPA may continue.

What is the total amount I can defer?  Back to top

The total amount you can defer is subject to an equity limit.

We will need to consider whether the equity available in the person’s security (usually their property) is adequate security for the deferred payment agreement. We will apply an equity limit to ensure that some value remains in the property used as security, over and above the amount deferred in the DPA.

Equity limit

The equity limit is set as 90% of the market or surrender value of the property less the total amount of any debt secured on that asset, and less the lower capital limit set on a national basis in respect of admissions to residential care, the current value of which can found on the social care fees and charges page.

Interest

Interest will be charged daily at the equivalent of the current rate of interest and compounded on a fortnightly basis.

Further information and guidance about how we calculate the cost of your care is on our page about how the cost of care is worked out.

Example

If the property is worth £100,000, then the equity limit is 90% of this value i.e. £90,000, less the current capital limit (currently, £14,250). So the maximum lending is £75,750.

If the person has already been lent a total amount that matches the equity limit (in the example above this would £75,750) we will not lend any more towards the care charges, unless the value of the property increases and so releases more equity. However, interest and DPA fees can still be added to the total deferred payment by us.

Fall in property value

Where a fall in the value of the property means that the total amount lent now exceeds the equity limit, we will not lend the person any more towards their care charges, unless the value of the property increases and so releases more equity. Again, additional interest and DPA fees can still be added to the deferred payment by us.

We are required by law to refuse to allow additional amounts of care costs to be deferred beyond the equity limit. However, interest can still build up beyond this point, and DPA fees can still be added to the deferred payment.

How do I apply for a deferred payment agreement?  Back to top

As part of your financial assessment you will be advised if you qualify for a deferred payment agreement and what you need to do to apply. You may also be advised that there are alternative options you can consider.

This can be a difficult and confusing time and we strongly recommend that you get independent financial advice before you enter into any agreement.

If you want to apply for a deferred payment, after seeking independent financial advice, please contact Staffordshire Cares to commence the process.

Do charges and interest apply to deferred payments?  Back to top

Under the Care Act, local authorities are able to charge an administration fee for arranging and running the deferred payment agreement and interest on any accrued debt. By law the administration charge should not exceed the costs of providing a deferred payment arrangement and interest will be in line with a national standard set by the government.

The current charges for DPA fees are shown on the adult social care fees and charges page.

We will inform you before you enter into a deferred payment agreement what the interest rates are currently set at and when interest rates are likely to change.

We will also inform you of the rate of interest which can be no more than:

• the actual cost of funding the loan
• the maximum rate which we are permitted to charge under Care Act regulations. This cannot be more than a government-approved standard rate, linked to the market gilt rate which is published every six months, plus 0.15%

We may vary the rate of interest to reflect any change in the cost of funding the loan subject to the maximum rate.

Interest will be charged daily at the equivalent of the current rate of interest and added to the total deferred payment on a fortnightly basis.

People who have a DPA will be notified of any changes to charges on an annual basis. The DPA fees and interest are added to the amount deferred unless it is specifically requested when applying for the DPA that these be invoiced separately, and they are paid immediately by the person.

You will be advised to seek independent legal and financial advice before you enter into an agreement.

Can Staffordshire County Council end the deferred payment agreement?  Back to top

We will provide notice that the deferred payment agreement or loans will cease and will provide the person with information of how their care costs will need to be met in future. Depending on their circumstances, the person may either receive local authority support in meeting the costs of their care or they may be required to meet their costs from their income and assets.

Circumstances in which we may refuse to defer or loan any more charges include:

• when a person’s total assets fall below the level of the means-test and the person becomes eligible for local authority support in paying for their care
• where a person no longer has need for care in a care home (or where appropriate supported living accommodation)
• if a person breaches certain predefined terms of their contract (which must be clearly set out in the contract) and our attempts to resolve the breach are unsuccessful and the contract has specified that we will stop making further payments in such a case
• if, under the charging regulations the property becomes disregarded for any reason and the person consequently qualifies for local authority support in paying for their care
• a person has reached the ‘equity limit’ that they are allowed to defer. This also applies when the value of the security has dropped and so the equity limit has been reached earlier than expected

Can I end the deferred payment agreement?  Back to top

You can end the deferred payment agreement in a number of ways:

• voluntarily by you, or someone acting on your behalf, paying the full amount that is due
• when the property or other form of security is sold and we are repaid
• upon death of the person receiving care and the amount is repaid to us from their estate

On ending the agreement, the full amount due must be paid to us.

When should the deferred payment be repaid to Staffordshire County Council?  Back to top

If the deferred payment agreement ends because a person dies, the amount owed to a local authority falls due 90 days after the person has died.

After this 90-day period, if we have not obtained payment or active steps to repay the debt are not being taken, (for example if the sale is not progressing and we have actively sought to resolve the situation or we believe that the executor is deliberately obstructing the sale of the property), then we will enter into legal proceedings to reclaim the amount due.

Further information on recovery of debt is included in  Annex D of The Care Act 2014 guidance.

Alternatives to the deferred payment agreement  Back to top

If you don't want to have a deferred payment agreement, there are other ways to pay for your care costs. Some examples are as follows:

• you may choose to rent out your property and use the income from this 
• you may also choose to pay the full cost of your care from your available income and savings or assets, or a family member may choose to pay some or all of this for you
• if your property is up for sale and on the market, you may wish to consider obtaining a solicitor’s undertaking

What if I'm not happy with the decision?  Back to top

The decision can be reviewed in the following circumstances:

• the decisions to refuse the application did not take into account any new information which would have changed the decision
• there are eligible care costs we have to take into account

If you are dissatisfied with the outcome of the review, you can appeal within 20 working days of being notified of the outcome. This period can be extended for exceptional reasons.

If you or your representative remain dissatisfied with any aspect of the deferred payment agreement scheme, you should follow the customer feedback and complaints procedure.

Further information  Back to top

Policy statement

This report was presented to and approved by Cabinet on 20 February 2019:

• Our policy statement (external link to a PDF document)

Information about the Care Act

You can download this document from Gov.UK:

• Care Act guidance (external link to a PDF document)

You can also contact our Staffordshire Cares team for information.

Deferred payment agreements - British Sign Language version

There is also an easy read guide on the Bolton Council website.