Deferred Payment Schemes

If you or your parent or relative needs permanent long term care in a care home and you are assessed for having to pay for your own care, but most of your capital is tied up in your former home, instead of having to necessarily sell it, you could apply for a Deferred Payments Arrangement providing:-

• a) You have been formally assessed as needing full time permanent residential or nursing care in a care home.
• b) Your property can provide adequate security for any such loan.
• c) Crucially your non-property capital is currently less than £23,250 (England), £50,000 if you live in Wales, or £21,500 in Scotland (2024-5).

So what is a Deferred Payment Arrangement?

A Deferred Payment Arrangement acts like an IOU where providing you qualify, instead of being forced into having to quickly sell your property just to meet your fees, you can ask your local authority to pay the fees for you whilst you decide what to do with the property, or until you find a buyer. You then clear the debt when you sell your home, or the person needing care dies whichever is the earliest. In the meantime your Local Authority charges a modest rate of interest and secure their debt by placing a legal charge over the title of your home.

It should be automatically offered to anyone who needs to be a self -funder because the value of their principal residence takes over the relevant thresholds and they haven’t managed to sell their home within 12 weeks of permanently entering full time permanent care. If you haven’t been offered it and should qualify, speak to your Local Authority.

Deferred Payment Schemes – How do they work?

Should you qualify, your Local Authority then pays your care fees for you until you sell your home or die when they will recover the debt from the sale proceeds.

To avoid you building up too large a debt your Local Authority will then ask you to pay them all of your income (except a small Personal Expenses Allowance which in 2024-5 is currently £30.15 p.w. in England, £39.50 p.w. if you live in Wales or £34.50 p.w. in Scotland).  To ensure the debt plus some interest is eventually repaid they secure their debt by placing a legal charge over the property.

You can keep a Deferred Payment Arrangement for as long as you like up until the earlier of selling the property, or the person needing care dies, or the accumulated debt exceeds around 75-80% of your home’s value. Once you clear any debt, any remaining value received from selling the property still belongs to the person needing care.

With your local authority’s permission, you can even let your home to generate even more income when apart from a maximum of £144 per week which you are allowed to keep for paying any tax and/or letting agents fees and insurance, you would then be asked to pay any surplus rental income to your Local Authority to further reduce any debt being accumulated.

Costs and Obligations of Deferred Payments Schemes

For setting up a Deferred Payments Scheme you will need to pay for the legal and administrative costs involved in creating a legal charge on your property, plus initial and periodic valuation fees. These do vary amongst Authorities so should you be interested in this type of scheme, you would need to speak to your own Local Authority to find out how much these would be.