Deferred payment agreement
A deferred payment agreement is a long-term loan you can request from your local authority (Northern Ireland excepted). It's applicable if you don’t have enough money to pay care home fees and are finding it difficult to sell your home, or don’t wish to sell your home.
By requesting this loan, the council will pay your residential care costs and secure the loan against your property, until you pass away or the property is sold. At this point the loan will be repaid to the local authority. This will all be outlined in an agreement with the council, which you will need to sign.
In England, all councils are required to offer deferred payments if you meet the following criteria:
- you’re receiving long-term care in a care home or soon will be
- you’re financially assessed as having less than £23,250 in savings, other than the value of your property
- you’re a homeowner and there isn’t anyone else living in the property, such as a spouse, partner, child or a relative aged 60 years or over.
In Wales, you can request a deferred payment if:
- your savings or other assets are less than £50,000
- you don’t have other income which is able to meet the costs of your care
- you have a beneficial interest in the property
- there’s no outstanding mortgage, or the outstanding mortgage will leave sufficient money to fund the cost of care.
Local authorities aren’t obliged to offer a deferred payment, but if they don’t, they must give the reason in writing.
Paying interest on the deferred payment agreement
Local authorities are able to charge interest on the deferred payment. Every six months, the Government sets the maximum interest rate that local authorities can charge. The maximum rate was 1.65% for 1 January–30 June 2019 (yearly rate, charged daily). Local authorities can also include additional set-up and administration fees.
Both the interest rate and charges are designed to cover the local authority’s costs in making the loan; they aren't allowed to make a profit from the arrangement.
When the property is sold, the executor of the estate will be liable to repay the debt out of the estate, although they are not themselves personally liable.
Challenging a local authority decision
If you feel you have been unfairly denied a deferred payment, seek clarity from the local authority about the reasons for this, and make a formal complaint if necessary.
12-week property disregard
Under certain circumstances, when a local authority is assessing how much you should contribute towards your care costs, the value of your property may be disregarded for the first 12 weeks of care. This can give those who are eligible some valuable breathing space before making important financial decisions, such as whether to sell your home to pay for care.
For example, if you decide to permanently move into a care home in England, Wales or Northern Ireland that has local authority-funded placements, and you own your own property, have low income and your savings are below the capital threshold (for example, £23,250 in England in 2019-20), then the council must ignore the value of your property for the first 12 weeks of your stay. After 12 weeks, the value of your property will be counted as part of your capital and you will be required to pay the full cost of your care.
You don't need to sell your property: you may choose t rent it out or apply for a Deferred Payment Agreement (see above) to cover your ongoing care costs. You can seek other sources of funding to pay for your care.
Local authorities can apply the 12-week disregard when you are already in permanent care if there is a sudden or unexpected change in your financial circumstances.
In Scotland, the rules are slightly different; the threshold for savings is £28,000 (2019-20), and although the property owner is entitled to the 12-week disregard unless the property is sold within that time, the disregard period can start from the time the decision is made that the stay in the care home is permanent (which may be longer than 12 weeks in some circumstances).
If you sell your home before the end of the 12-week property disregard
In these circumstances, it's likely that your capital will then exceed the capital threshold. You will then become responsible for paying your own care costs from the date your property sells.
When it doesn't pay to take the 12-week property disregard
If you have a high weekly income, it may be financially beneficial for you not to take the offer of the 12-week property disregard. Any element of council funding means that you aren't entitled to receive Attendance Allowance after 28 days. If you're able to pay for your care in full from your income, then it's advisable to decline the offer of a 12-week property disregard, and to continue to claim Attendance Allowance throughout. Seek advice from your local authority if this scenario applies to you.
Government funding might be available to help pay for a care home. We explain the means test and other rules.
Find out about third-party top-up fees; what they are, when they can be paid, and how to complete the paperwork.
We explain how you can pay for your care, what happens if your money runs out and getting financial advice.