Deferred Payment Agreements
Deferred payment agreements have been around since 2001 under section 55 of the Health and Social Care Act 2001 but the Care Act 2014 builds on these agreements and provides a framework for wider implementation as a way to prevent people from having to sell their home in their lifetime to meet the cost of their care. Care and Support (Deferred Payment) Regulations specify when a Local Authority MUST offer a DPA and also times when they MAY offer a DPA.
‘Required to’ offer a Deferred Payment Agreement
A person is eligible for and so must be offered a deferred payment agreement if they meet all three of the following criteria at the point of applying:
• If they have been assessed by the Local Authority as having eligible needs that need to be met in a care/nursing home
• Anyone who has less than (or equal to) £23,250 in assets excluding the value of their home
• Anyone whose home is not disregarded for the purposes of the charging assessment
‘Permitted to’ offer a Deferred Payment Agreement
Local authorities are also encouraged to offer the scheme more widely to anyone they feel would benefit who does not fully meet the criteria for example someone who has over the upper funding levels of £23’250 and those whose care and support is provided in supported living accommodation.
DPA’s and Top-ups
The amount a Local Authority would usually expect to pay will depend on things such as the type of care, the care home, room size etc. If someone chooses a care home that is more expensive than the choice of homes Local Authority have offered, the difference in the cost is a shortfall and a top up may be required.
At a minimum, when local authorities are required to offer a deferred payment agreement they must allow someone to defer their ‘core’ care costs. In principle, a person should be able to defer their full care costs including any top-ups, but to ensure sustainability of the deferral, local authorities have discretion over the amount people are permitted to top-up.
Local authorities should accept any top-up deemed to be reasonable given considerations of affordability, sustainability and available equity.
Right to Refuse
A local authority may refuse to enter into a deferred payment agreement despite someone meeting the eligibility criteria:
• Where a local authority is unable to secure a first charge on the person’s property
• Where a person is seeking to pay a top up and/or
• Where a person does not agree to the terms and conditions of the agreement, for example a requirement to insure and maintain the property.
• Where a person does not have the mental capacity to agree to a deferred payment agreement or have a legally appointed agent willing to agree
From April 1st 2015 interest is chargeable from the start of the agreement but must not exceed the maximum amount specified in regulations.
The interest charged is based on the Gilt rate plus 0.15%. This is reviewed twice a year by the Office of Budgetary Responsibility and applies from 1st Jan – 30th June and 1st July – 31st Dec each year.
Interest will be added on a compound basis and continue to accrue on the amount deferred even if the equity limit is reached. It will also apply during breaks in care / and after death, until the deferred amount is repaid.
The amount that can be deferred will depend on the value of a property, this determines an ‘equity limit’ which is calculated as follows: Property’s current market value (CMV), less 10% of CMV, minus £14,250 and the amount of any encumbrance secured on it.
A deferred payment can be repaid at any time. Partial repayments may also be made. The executor of an estate should arrange repayment of the money owed to the Local Authority, this will usually need to be done within 90 days. A county court rate of interest maybe charged if "active steps not being taken to repay the debt". Interest continues to accrue until the deferred amount is repaid.
Regulated Financial Advice
Before entering into a deferred payment agreement a Local Authority should ‘flag up the existence’ of regulated financial advice and should be able to direct someone to a choice of independent financial advisers who are qualified and accredited