Ep 28 - Dementia and paying for care - a personal view | SavvyWoman

What are deferred payment agreements if you need to pay for your long-term care?

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If you need to go into care you may be able to put off paying for it. But what are deferred payment agreements if you need to pay for your long-term care?

Q. How do deferred payment agreements work?

A. The introduction of the Care Act means that from 1st April 2015, if you live in England and have to pay for your long-term care, the local authority has to offer you a ‘deferred payment agreement’. That means you can delay paying the local authority for your care until you choose to sell your home or until after you’ve died.

A deferred payment agreement is – as its name suggests – an arrangement with your local authority to defer, or put off, paying for your care. It can be useful if you would otherwise have to sell your home to pay for care, because it means you can keep your home either until it’s a better time for you to sell it or until you die.

SAVVY TIP: Bear in mind that if you have a husband, wife, civil partner or partner, or a close relative over the age of 60 living in your home, its value won’t be taken into account when working out whether you should pay for your care. Your home isn’t taken into account if you have a dependent child living there either or in some other circumstances.

Q. Is everyone who owns a home and pays their care fees eligible for a deferred payment agreement?

A. No, you’re only eligible for a deferred payment agreement if:

  • You’re in a care home or you’re going to move into one soon.

SAVVY TIP: Deferred payment agreements aren’t designed to be used for short-term stays in a care home. So you must be in a care home for more than 12 weeks before you can get a deferred payment agreement.

  • You own your own home and you don’t have relatives living there as I’ve explained above.
  • You have savings and investments worth less than £23,250 (not including your home or pension), although the council may still offer you this option if you have more savings than this.

SAVVY TIP: If you meet these criteria, you should be eligible for a deferred payment agreement. Your local authority social services department (which will have assessed your needs and your finances) should be able to tell you whether you’re eligible.

Q. Are there any costs and charges to pay?

A. Yes. Your council can charge a set up fee and interest on the money you owe them. The set up fee is to cover the costs the council incurs in setting up your deferred payment agreement, and not to make a profit.

The interest rate can vary from one local authority to the other, but it can’t be more than the government rate, which is currently 2.65%. The interest rate can be reviewed every six months. Interest is charged to cover the council’s costs and is not designed to make a profit. To find out if your council charges interest on deferred payment agreements, contact them directly.

Q. How much can I defer with a deferred payment agreement?

A. The amount you can defer will depend on the value of your home, which determines what’s called your ‘equity limit’. For most people this will be up to 80% to 90% of the equity available in their home. The equity is the value of your property minus any debts that are secured on it (such as a mortgage).

Q. How will my home be valued?

A. The local authority will arrange a valuation. You can also get your property valued if you don’t agree with the council’s valuation.

Q. Will I have to maintain my home?

A. Your home will have to be insured and maintained while it’s part of the deferred payment agreement. How it will need to be maintained will be set out in the agreement. If you’re in a flood risk area, it may be harder to get insurance, but the council won’t accept an uninsured property. It may also be harder to get insurance if no-one will be living in the property.

Q. Can I rent out my home while I have a deferred payment agreement?

A. Yes, you can, as long as your insurer (and mortgage lender, if you have one) has been informed and doesn’t raise any objections. It can be a good option as you can use the rental income to pay towards the care costs, for example.

Q. What happens if the person who needs care has dementia or can’t make a decision about their own finances?

A. If the person doesn’t have the capacity to agree to a deferred payment agreement, a relative or friend who has legal power of attorney for them would have to represent them.

Q. When do you have to repay a deferred payment?

The money has to be paid back within 56 days of selling your home (eight weeks) or within 90 days of your death. You’ll be charged interest during this period.

However, you can pay back the care fees you owe at any point before then. You aren’t committed to the agreement once you’ve signed up to it. You don’t have to use the money raised from selling the home to repay what you owe.

Q. What happens if my home can’t be sold within 90 days?

A. If the fees are still outstanding and your home hasn’t been sold within 90 days, the council has the right to try and recover the money through the courts, which could involve forcing the property to be sold (at less than the market value).

Related articles:

Section 117 Aftercare – when all your care may be paid for if you’re sectioned

Arranging care at home for an elderly relative

How do third party top ups for care home funding work?

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