9. Deferred Payment Agreements

9. Deferred payment agreements

This chapter provides guidance on:

• sections 34-36 of the Care Act 2014
• the Care and Support (Deferred Payment) Regulations 2014

This chapter covers:

• who to offer a deferred payment to
• provision of information and advice before making a deferred payment agreement
• how much can be deferred, and security for the agreement
• interest rate for the deferral and administrative charges
• making the agreement, responsibilities while the agreement is in place and termination of the agreement .

Definitions

9.1 ‘Care costs’ – all costs charged to a person by a care provider, including any top-ups and core care costs. This includes where appropriate the costs associated with the provision of supported accommodation.

9.2 ‘Top ups’ – this term has the usual meaning accorded to it within the care and support sector, but for the avoidance of doubt, top-ups are costs due to a local authority under Section 30 of the Care Act or costs for the provision of the type of care referred to in Section 34(3)(a) of the Care Act.

Introduction

9.3 The establishment of the universal deferred payment scheme means that people should not be forced to sell their home in their lifetime to pay for their care. By entering into a deferred payment agreement, a local authority agrees to:

• defer the payment of charges due to it from the adult, for the costs of meeting needs in a care or home or supported living accommodation; or
• defer the repayment of a loan to the adult in instalments, to cover the costs of care and support in a care home or supported living accommodation.

Deferring payment can help people to delay the need to sell their home, and provides 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.

9.4 A deferred payment agreement can provide additional flexibility for when and how someone pays for their care and support. It should be stressed from the outset that the payment for care and support is deferred and not ‘written off’ – the costs of provision of care and support will have to be repaid by the individual (or a third party on their behalf) at a later date.

9.5 The scheme is universally available throughout England, and local authorities are required to offer deferred payment agreements to people who meet certain criteria governing eligibility set out in paragraph 9.7 below (the qualifying criteria ) for the scheme. Local authorities need to ensure that adequate security is in place for the amount being deferred, so that they can be confident that the amount deferred will be repaid in the future. As explained below, local authorities are also encouraged to offer the scheme more widely to anyone they feel would benefit who does not fully meet the criteria.

9.6 A deferral can last until death. ,hHowever, many people choose to use a deferred payment agreement as a ‘bridging loan’ to give them time and flexibility to sell their home when they choose to do so. This is entirely up to the individual to decide. Further details on deferred payment agreements are set out in the sections below.

Who to offer deferred payments agreements to

Criteria governing eligibilityQualifying criteria for deferred payment agreements

9.7 Deferred payment agreements are designed to prevent people from being forced to sell their home in their lifetime to meet the cost of their care. Local authorities must offer them to people who meet the criteria below and who are able to provide adequate security (see section entitled ‘Obtaining Security’ below). Subject to these criteria they must offer them to people who have their needs met by the local authority, and also people who meet their own needs. The regulations provide that someone must be offered a deferred payment agreement if they meet all of the following criteria at the point of applying for a deferred payment agreement: Broadly, they are that the:

a)person is:

1. ordinarily resident in the local authority area or present in the area but of no settled residence or
2. ordinarily resident in another local authority area but the local authority has determined that they will or would meet the individual’s care needs under section 19 of the Care Act if asked to do so [see note 1] or

b)person has needs which are to be met by the provision of care in a care home. This is determined when someone is assessed as having care and support needs [see note 2] which the local authority considers should be met through a care home placement;

c)person has less than (or equal to) £23,250 in assets excluding the value of their main or only home (for example, in savings, and other non-housing assets and housing assets other than their main or only home)

d)person’s home is not disregarded [see note 3],; for example, it is not occupied by a spouse or dependent relative as defined in regulations on charging for care and support (for example, someone whose home is taken into account in the local authority financial assessment and so might need to be sold).

Note 1

Where a local authority is meeting an individual’s care and support needs under section 19(2) of the Care Act.

Note 2

When someone is arranging their own care and support and the authority has not yet performed an assessmentthe local authority must carry out one in order to determine for itself whether the person has needs for care and support which, if the local authority were meeting needs, it would meet by the provision of accommodation in a care home. Thisthis condition is satisfied when someone would be assessed as having eligible needs were the authority to have carried out such an assessment.

Note 3

Disregarded for the purposes of the financial assessment carried out under section 17 of the Act.

9.8 As well as providing protection for people facing the prospect of having to sell their home to pay for care, deferred payment agreements can offer valuable flexibility, giving people greater choice over how they pay their care costs. Local authorities are, at their discretion, permitted to be more generous than these criteria and offer deferred payment agreements to people who do not meet criteria b), c) or d) above. In deciding whether someone who does not meet all of the criteria above should still be offered a deferred payment, some considerations a local authority may wish to take into account include (but are not limited to):

a) whether meeting care costs would leave someone with very few accessible assets (this might include assets which cannot quickly/easily be liquidated or converted to cash)

b) if someone would like to use wealth tied up in their home to fund more than just their core care costs and purchase affordable top-ups (see further guidance on ‘How much can be deferred’ below)

c) whether someone has any other accessible means to help them meet the cost of their care and support

d) if a person is narrowly not entitled to a deferred payment agreement given the criteria above, for example because they have slightly more than the £23,250 asset threshold. This should include people who are likely to meet the criteria in the near future

9.9 Local authorities may also at their discretion enter into deferred payment agreements with people whose care and support is provided in supported living accommodation. The local authority should not exercise this discretion unless the person intends to retain their former home and pay the associated care and accommodation rental costs from their deferred payment. Further details on precisely what qualifies as supported living accommodation are set out in regulations. Deferred payment agreements cannot be entered into to finance mortgage payments on supported living accommodation.

Types of Deferred Payment Agreement

9.10 Deferred payment agreements can take 2two forms:

• 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).

9.11 When offering a deferred payment agreement, local authorities should consider which type is most appropriate given all the circumstancesfor the individual. In making the decision authorities should have regard to the individual’s preferences and their duties under the Care Act, including their duties under the well-being principle and their market duties, and the individual’s preferences. Local aAuthorities should cannot refuse to enter into a loan-type dDeferred Ppayment aAgreement if all the criteria for a mandatory agreement are met and the individual requests it.

9.12 The local authority must comply with all relevant legislation and act under the guidance.

9.13 In all cases, a local authority is only required to enter into a DPA deferred payment agreement to cover the costs of care and support which it considers necessary.

Permission to refuse a deferred payment agreement

9.14A local authority must offer a deferred payment to someone meeting the criteria governing eligibilitythe qualifying criteriafor deferred payment agreements and who is able to provide adequate security for the debt (obtaining a first land registry charge on their property, see ‘Obtaining security’ below); and may offer a deferred payment agreement to others who do not meet the criteria, at their discretion (see below).

9.15However,tThere are, however, certain circumstances in which a local authority may refuse a request for a deferred payment agreement (‘permission to refuse’), even if a person meets the qualifyingeligibility criteria and the local authority would otherwise be required to offer the person an agreement. This permission (or discretion) to refuse is intended to provide local authorities with a reasonable safeguard against default or non-repayment of debt.

9.16 A local authority may refuse a deferred payment agreement despite someone meeting the eligibility qualifying criteria:

a) where a local authority is unable to secure a first charge on the person’s property

b) where someone is seeking a top up [see note 4]

c) where a person does not agree to the terms and conditions of the agreement, for example a requirementto insure and maintain the property

Note 4

In these situations, a local authority should still seek to offer a deferred payment agreement but should be guided by principles in the section below (entitled ‘how much to defer’) to determine a maximum amount that is sustainable (or reflects their core care costs without any top-ups) and agree a deferral. The person can then choose whether they wish to agree.

9.17 In any of the above circumstances, a local authority should consider whether to exercise its discretion to offer a deferred payment anyway (for example, if a person’s property is uninsurable but has a high land value, the local authority may choose to accept charges against this land as security instead).

Circumstances in which local authorities may stop making payments under the Deferred Payment Agreementdeferringcare costs

9.18 There are also circumstances where a local authority may refuse to defer or loan any more charges for a person who has an active deferred payment agreement. Local authorities cannot demand repayment in these circumstances, and repayment is still subject to the usual terms of termination, as set out in the section entitled ‘termination of the agreement’ below.

9.19 The local authority should provide a minimum of 30 days’ advance notice that further deferrals or loans will cease; and should provide the person with an indication of how their care costs will need to be met in future. Depending on their circumstances, the person may either receive local authority support in meeting the costs of their care or may be required to meet their costs from their income and assets. Local authorities exercising these powers to cease deferring additional amounts should consider their decision to do so whilst considering the person’s circumstances and their overarching duties under the well-being principle.

9.20 Circumstances in which a local authority may refuse to defer or loan any more charges include25:

a) when a person’s total assets fall below the level of the means-test (see chapter 8), and the person becomes eligible for local authority support in paying for their care

b) where a person no longer has need for care in a care home (or where appropriate supported living accommodation)

c) if a person breaches certain predefined terms of their contract (which must be clearly set out in the contract) and the local authority’s attempts to resolve the breach are unsuccessful and the contract has specified that the authority will stop making further payments in such a case

d) if, under the charging regulations (see also chapter 8), the property becomes disregarded for any reason and the person consequently qualifies for local authority support in paying for their care, including but not limited to:

(i) where a spouse or dependent relative (as defined in charging regulations) has moved into the property after the agreement has been made, where this means the person is eligible for local authority support in paying for care and no longer requires a deferred payment agreement

(ii) where a relative who was living in the property at the time of the agreement subsequently becomes a dependent relative (as defined in charging regulations). The local authority may cease further deferrals at this point

9.21 Local authorities should not exercise these discretionary powers if a person would, as a result, be unable to pay any tariff income due to the local authority from their non-housing assets.

9.22 Local authorities must also cease deferring or loaning further amounts when a person has reached the ‘equity limit’ that they are allowed to defer (see ‘how much can be deferred’ below); or when a person is no longer receiving care and support in either a care home setting or in supported living accommodation. This also applies when the value of the security has dropped and so the equity limit has been reached earlier than expected. 26

Case study 1

Lucille develops a need for a care home placement. She lives alone and is the sole owner of her home. Her home is valued at £165,000, and she has £15,000 in savings. Lucille meets the criteria governing eligibilityqualifying criteria for a deferred payment.

Information and advice

9.23 Under the Care Act, local authorities have responsibilities to provide information and advice about people’s care and support. These extend to deferred payment schemes as well. This chapter should be read in combination with chapter 3 (‘Information and Advice’).

9.24 In order to be able to make well-informed choices, it is essential that people access appropriate information and advice before taking out a deferred payment agreement (DPA). It is also important that people are kept informed about their DPA throughout the course of the agreement, and that they (and the executor of their estate where appropriate) receive the necessary information upon termination of the agreement.

9.25 Information and advice requirements prior to taking out a DPA are discussed in this section; requirements on local authorities while the DPA is in place are discussed in a separate section below (see ‘the local authority’s responsibilities whilst the agreement is in place’); and the section entitled ‘termination of the agreement’ addresses the responsibilities on the local authority when the agreement is concluded. The requirements on local authorities to offer and facilitate access to financial information and advice on other options for paying for care are discussed in chapter 3.

9.26 Deferred payment agreements are often made during a time that is demanding for a person and their loved ones – a period when they are making a transition into a care home. People may need additional support during this period, and the local authority has a role in providing this support and facilitating their transition, particularly if their transition to care is made rapidly and/or at an unexpected point. The local authority must provide information in a way which is clear and easy to understand, and it should be designed to ease the process of transition for people, their carers and their families.

9.27Carers and families often assist people in making decisions about their care and how they pay for it. Local authorities should as appropriate invite carers and/or families to participate in discussions, and should also provide them with all the information that would otherwise be given to the person they care for, subject (where required)27 to the consent of the person with care and support needs (if they have capacity) or someone else with appropriate authorisation. In doing this, they must ensure compliance with mental capacity and data protection legislation, and the other duties pertaining to information and advice set out in chapter 3 of this guidance.