Looking for a care home is often a stressful experience for care seekers, especially when fees and funding enter the picture. If you’re worried about care home fees for yourself or your elderly parents, all is not lost - there are alternative options for you.
In this article, Lottie tackles deferred payment agreements for care home fees - what are they and how do they work?
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Also referred to as deferred payment schemes, a Deferred Payment Agreement is an arrangement with your local council where they pay for your care home and you can repay the money later, either when you sell your home, or after your death. They are only available for those going into long-term care.
The total value of your property will be used to pay for your fees which means you can keep your property. Be aware that you will have to sign a legal agreement stating that the money will be repaid when your home is sold.
It’s worth pointing out that if you have a partner, dependent child, relative over the age of 60 or someone who is sick or disabled still living in your home when you go into care, your home will not be counted as part of your assets. Therefore, you will not be required to use the value of your home to pay for your care and you won’t need a deferred payment agreement.
However, if you are selling your home, the money you owe on the Deferred Payment Agreement - including any interest and administration charges - must be repaid. If you pass away, the executor of your will is responsible for this repayment; either on the date the property or asset is sold or disposed of, or 90 days after your death.
If the executor encounters any difficulties or is struggling to repay the amount, your local council may grant them more time.
Deferred payment agreements and care funding in general work differently across the UK. Read on for more information on each country:
In England, to be eligible for a Deferred Payment Allowance, your total savings and capital will need to be less than £23,250.
Local authorities in England must offer you a Deferred Payment Agreement if you are deemed eligible and they must clearly explain how the process works and what the advantages and disadvantages are.
In Scotland, to be eligible for a Deferred Payment Allowance, your total savings and capital will need to be less than £28,500. If you live in Scotland and you need information on deferred payment schemes, Age Scotland is available to provide help and advice.
In Wales, your go-to for guidance and services will be the Welsh Government website or Age Cymru. Your total savings and capital will need to be below £50,000.
There’s no formal deferred payment system in Northern Ireland as such, but it’s worth asking your local Health and Social Care Trust for more information; either by looking on the website or calling Age NI on 0808 808 7575.
To find out whether you might be eligible for a Deferred Payment Agreement, simply contact your local council. Local authorities in England, Scotland and Wales must offer you a Deferred Payment Agreement if you are eligible, explain to you exactly what they are and how they work.
Most people use a deferred payment scheme when their savings and other assets - save for their home - are low, but the value of their home pushes them over the threshold for paying care costs themselves.
Such people might then set up a Deferred Payment Agreement so they won’t have to sell their homes to pay for care fees.
To be eligible for a deferred payment scheme, you must meet the following eligibility criteria:
You must also have savings or capital less than the upper means test threshold for your country, which we discussed earlier.
Deferred payment schemes are only available for long-term care, so you don’t have to worry if you need to go into a care home for a post-hospital or respite stay.
If you are deemed eligible, you must ask for a Deferred Payment Agreement - you can’t be forced into one.
If you are planning to move into a care home, you will request a care needs assessment from your local council.
Once you have been assessed as needing to move into a home, you will then go on to request a Deferred Payment Agreement.
A financial assessment will also be carried out to look at your income, savings and assets.
Although there are certain criteria for Deferred Payment Agreements, your local authority may still offer you one even if you do not meet all their requirements, but they think you would benefit from the scheme. For example, if your savings are close to the means test threshold you might still be allowed to join the scheme.
If you feel you have been unfairly denied a Deferred Payment Agreement, you can request exact reasons from your local council and raise a formal complaint if you are dissatisfied with the answer.
A Deferred Payment Agreement is a loan, so you must remember that there will be interest and administration fees to pay back on top of the original amount. We would thoroughly recommend seeking information and legal advice from financial advice services before you sign anything.
If you are entering a Deferred Payment Agreement, bear in mind that although your council doesn’t have to, they might charge interest on deferred payments to help them cover the costs.
In England and Wales, local councils can choose the amount they charge (although this cannot exceed a government-approved standard rate). The interest rate is not fixed and is reviewed every six months in January and again in July.
In Scotland, there aren’t any interest charges - but once the agreement is terminated, or 56 days after the person’s death, interest is then charged at a reasonable rate set by the local council.
If the money is not repaid, the council may decide to increase the interest until the money is paid off.
Your local council can charge you administration fees to cover the costs of setting up a Deferred Payment Agreement, including Land Registry fees, valuation of your home, legal fees, postage, phone and printing.
There may also be some one-off charges, such as having your home revalued, which comes with valuation fees.
However, your local council is required to be reasonable, not exceed costs and to make a list of these charges publicly available so there shouldn’t be any nasty surprises later down the line.
Although signing up for a deferred payment scheme is a serious decision to make, there are advantages to using one, such as:
As we’ve discussed, signing a Deferred Payment Agreement requires plenty of prior consideration as there can be a few disadvantages to these schemes. This includes:
Your local council will consider any income that you have, including your state pension and any other state benefits or private pensions. Unless you have a relatively low income, you will normally need to contribute part of your income towards your care home fees.
The Disposable Income Allowance is applicable in England only and means that if you have a Deferred Payment Agreement, the local council must take into account any costs to maintain your home when deciding how much you’ll pay towards care home fees.
Disposable Income Allowance means that your contribution will be set to a level that lets you keep a certain amount of money each week - £144 to be exact. This should help you pay for things like bills, insurance and maintenance costs while you are not living there.
If you want to pay more towards your care home fees and reduce your Disposable Income Allowance, you are free to do so - this has the advantage of reducing the amount you then owe to your local council through your deferred payment scheme.
Depending on your exact circumstances, as well as Deferred Payment Agreements, there are other ways you can get help with your care home fees, including:
NHS Continuing Healthcare or NHS CHC - Those eligible must have a disability, major illness or have been in an accident
NHS Funded Nursing Care or NHS FNC - This is available to help pay for nursing home fees once you have been officially assessed by the NHS as needing nursing care
Attendance Allowance - This is a benefit for those with a physical or mental disability, or a terminal illness, who have reached State Pension age and need a higher level of care
Top-up Fees - Your family and friends can volunteer to pay the difference between the amount your local council will pay for care home costs and the amount you will pay to help you afford a more expensive care home
However they’re dressed up, Deferred Payment Agreements are loans - loans that must be paid back along with any interest and admin fees.
For this reason, we really recommend seeking professional independent financial advice before requesting and signing a Deferred Payment Agreement to ensure you know exactly what you are entering into.
If you still have a mortgage on your home, it’s important to check the terms and conditions and speak to your lender, as some lenders won’t let you take out another loan secured on the home.
We hope this article has told you all you need to know about Deferred Payment Agreements. If you still have questions, there are plenty of useful resources online, such as this article from Which or the Gov UK website.