Deferred Payments Scheme
If the property has not been sold and a person has insufficient other assets or income, besides their property, to cover the cost of their care, they can request the local authority put a charge on their property to be repaid upon their death or earlier sale of the property. The home will usually be counted as capital 12 weeks after a permanent move into care.
Prior to the Care Act 2014, in circumstances such as these, the Local Authority could at their discretion agree to enter into a 'Deferred Payments Scheme' agreement to create a loan to the person to meet the cost of their care.
This changed under the Care Act 2014 and people will have a legal right to defer paying for care home costs in certain circumstances. If this applies to you, you should be told about this during the 12 week property disregard period.
If you ask for a deferred payment, your local council has to cover the costs incurred for paying your care and reclaim them when the property is sold, either whilst you are in the care home or after your death, so the council must be confident that the loan is secure (and they will get their money back at a later date).
The terms you can ask for a deferred payment are:
- your needs assessment shows that you would benefit from moving into a care home
- you have less than £23,250 in savings (aside from the value of your home)
- there are no dependent relatives living in your home (if there are, the value of your property should be ‘disregarded’ by the council when working out what you should pay towards your care home fees)
The loan is secured by a charge on the person's property and it is important to realise that this is just a deferred loan and this will have to come off the value of their property when it is eventually sold.
However, there are a few points worth noting:
- the above arrangement means that the property could be let out to help with the care costs
- it gives the person's family some flexibility so that they can make the most of the assets for instance: improving the property before selling to enhance its value
- it allows a person to remain in the property market and take part in any increases in property values
If a property is used as security for a deferred payment agreement, the equity limit must be set at the value of the property minus ten percent, plus existing capital minus £14,250 and the amount of any legal claims by another party already secured on it, for example a mortgage. The maximum interest rate changes every six months to track the gilt rate and it is fixed for six-monthly periods.
Apart from providing some leeway to local authorities against changes in the value of the security (such as possible house price fluctuations) this buffer also lessens the risk that they may not be able to recoup the full amount owed. In addition, it also means that people then qualify for local authority support when they have used the equity available in their property as they are within the local authority's funding limits.
If you were receiving Attendance Allowance before going into care, it will stop after 4 weeks, but can restart at the 13th week if you fund your own care or the Local Authority are temporarily funding your care under a deferred payments scheme agreement whilst you sell your property and you can then repay them.
The Deferred Payment Agreement can be ended at any time and the debt repaid either by the sale of the property or on death. In these circumstances the loan becomes repayable 90 days later.