Advice

Deferred Payments Agreement

A deferred payment agreement (DPA) is an arrangement with a local authority that allows people to use their home’s value to cover care home costs or supported living costs. It lets them delay paying those costs until later, so they don’t have to sell their home right away.

Deferring payment can provide peace of mind during a time that can be challenging (or even a crisis point) for them and their loved ones as they make the transition into care. A deferred payment agreement can provide flexibility for when and how they pay for their care and support. The payment for care and support is not ‘written off’ but rather repaid by the individual (or a third party on their behalf) at a later date.

A deferral can last until an individual’s death or used as a ‘bridging loan’ to give them time and flexibility to sell their home when they choose to do so. It is entirely up to the individual to decide.

A DPA might benefit people who, either: don’t want to sell their property at that time, or, need more time to sell their property. Some people may choose to combine a DPA with renting out their property to keep the loan cost down. It is important to think carefully about implications of renting and take independent financial advice.

The local authority can charge admin fees to set up a DPA and charge interest on deferred fees. It is important for anyone thinking about a DPA to get independent financial advice. There are services that can help you search for a financial adviser, they include:

• The Personal Finance Society – this tool from the financial planning professional body can help you find a local qualified adviser (it includes advisers who cover more than retirement options so mortgages, investments and other financial planning).
• Unbiased a free service to match you to a fully regulated financial adviser, mortgage broker or accountant.
• Vouchedfor for reviewed and vetted financial, legal and accounting advice.
• Society of Later Life Advisers (SOLLA) a not-for-profit society that can help if you’re in later life and are looking for an adviser with Later Life Adviser accreditation.

Types of DPA’s

Local authority’s offer two types of deferred payment agreements:

• the local authority pays the care home or supported living accommodation directly and defers the charges due to it from the individual (traditional type)
• the individual pays the care provider for their care and the local authority loans them the cost of care in instalments less any contributions the individual contributes from other sources (loan type)

Eligibility Criteria

The local authority must offer a DPA to individuals meeting all of the following criteria at the point of applying for a DPA:

• person is ordinarily resident in the local authority area
• person has needs which the local authority considers should be met through a care home placement
• person has less than (or equal to) £23,250 in assets excluding the value of their main or only home
• person’s home is not disregarded for the purposes of the financial assessment, for example: it is not occupied by a spouse or a close relative who is aged 60 or over, aged 18 or under, or, who is ill or disabled.
• Person is able to provide adequate security

The local authority must discuss the option of deferred payments with people who meet the eligibility criteria but they also have to ensure that adequate financial security is in place, to be confident that the deferred amount can be repaid at a future date. The local authority needs to project forward and estimate the overall cost of the care home arrangement.

People who want a DPA should make a request to their local authority. The local authority must consider their request and decide whether the arrangement is viable before agreeing to it. The local authority has power to refuse a DPA once it has considered an individual’s situation.

Adequate security

Local authorities must ensure that there is adequate security in place when they enter into a deferred payment agreement with an individual. One form of ‘adequate security’ would be the local authority securing a first legal mortgage charge against a property on the Land Register. Where local authorities can secure a first legal mortgage charge as security they must offer a deferred payment to an individual who meets the qualifying criteria for the scheme.

Local authorities should also consider whether another type of security could be provided if an individual cannot secure their deferred payment agreement with a charge on a property. Examples of alternative security might be, but not limited to: a solicitors, a valuable piece of art or jewellery, a third-party guarantor, a life insurance policy, etc.

In cases where an agreement is to be secured with a jointly owned property, local authorities must seek both owners’ consent (and agreement) to a charge being placed on the property. Both owners need to be signatories to the charge agreement, and the co-owner will need to agree that they will not object to the sale of the property for the purpose of repaying the debt due to the local authority.

Valuing property

Where an individual intends to secure their DPA with a property, their local authority must obtain a valuation of it. Individuals can request an independent assessment of their property’s value in addition to the local authority’s valuation. If the independent valuation is substantially different to the local authority’s valuation, this should be discussed with the local authority and an appropriate valuation agreed before proceeding with the DPA.

Deferred amount

In principle, the amount that can be deferred should be capable of covering the whole amount of care costs. In certain circumstances, the local authority may also require a contribution from the individual’s income.

Three elements inform how much can be deferred:

• amount of equity (value) available in the chosen form of security
• amount the individual contributes to care costs from other sources, including: income, contribution from savings, financial products or a third-party, and
• total care costs faced

The local authority must set out an ‘equity limit’ which is the total amount that can be deferred and ensure the amount actually deferred does not rise above this. The equity limit calculation must ensure there is a buffer to cover subsequent interest accruals and provide a small ‘cushion’ in case of variations in the value of the chosen security, i.e. a fall in house prices.

When calculating the equity limit, the local authority must include interest accrued and fees to be deferred.

Further information and advice

You can find out more about City of York Councils deferred payment schemes here or by contacting:

Adult Social Care Community Team

Telephone 01904 555111

Textphone 07534 437804

West Offices, Station Rise, York, YO1 6GA

Email adult.socialsupport@york.gov.uk