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 Scheme 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) C • Crucially your non-property capital is currently less than £23,250 (England), £50,000 if you live in Wales, or £18,500 (Scotland) all rates applicable as at 2022-23.

So if your other assets are significantly more, this scheme will not be available (at least until they do fall below any future thresholds) and therefore you will need to look at alternative means of paying for care

Please note this scheme only applies to your main principal residence. If you have other investment property or a holiday home, these will not qualify.

So what is a Deferred Payments Scheme?

Well it is like an IOU where instead of being forced into selling your home immediately, you can keep it (possibly to let it to help meet care fees) and you can ask your local authority to pay the care fees for you instead until you eventually decide to sell your home or you die. As such they can be used either as a type of bridging finance until you manage to sell the property, or as a longer-term strategy to delay or even avoid having to sell any home during the person’s lifetime.

These schemes should be offered to anyone who they deem needs to be a self-funder providing their other assessable capital is below the respective threshold and has still not sold their principal private home in the 12 week property disregard period. However, you have to apply and the Local Authority retains the right not to offer it but if they don’t, they do have to tell you why in writing.

Deferred Payment Schemes – How do they work?

Deferred Payments scheme are not automatically granted, you have to apply to your Local Authority.

If granted your Local Authority undertakes to pay your care fees for you to the care home (until you sell your home or die) when they will recover the debt from the sale proceeds.

They secure this ongoing debt by placing a legal charge on the property so it can’t be sold without your solicitor repaying any debt from the sale proceeds.

In the meantime, to avoid potentially very large bills your Local Authority will expect you to pay them all of your income bar a Personal Expenses Allowance (currently £27.19 p.w. (England) £35.00 p.w. (Wales) or £31.00 p.w. (Scotland) all rates 2022-23 ). Should you want to let out any former home and your local authority agrees, in England you can keep up to £144 per week of any rental income to cover any expenses incurred and to pay tax. Any balance will need to be paid to the Local Authority to help reduce how much they need to fund and to keep your debt from escalating so quickly.

There is no definite maximum time limit you can have a Deferred Payment Arrangement for but the Local Authority will occasionally write to you and ask your intentions regarding selling the property and they will not allow any debt to exceed a certain % of the property’s value (normally around 80%). They will, therefore, ascertain any property’s value at outset and periodically revalue it if the debt builds to approximately 75% of its original valuation.

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 vary so you would need to speak to your own Local Authority to find out how much these would be.