Deferred Payment Scheme Information Leaflet
What is the ‘Deferred Payments Scheme’?
The Deferred Payments Scheme is designed to help you if you have been assessed as
having to pay the full cost of your residential or nursing care, but cannot afford to pay the full
weekly charge because most of your capital is tied up in your home.
Effectively the scheme offers you a loan from the Council. It doesn’t work in exactly the
same way as a conventional loan as the Council doesn’t give you a fixed sum of money
when you join the scheme, but pays an agreed part of your weekly care and support charge.
You will pay a weekly contribution towards your care that you have been financially
assessed as being able to pay from your income and other savings. The Council pays the
part of your weekly charge that you cannot afford until the value of your home is released.
The part the Council pays is your ‘Deferred Payment’.
The deferred payment builds up as a debt, which is cleared when the money tied up in your
home is released. For many people this will be done by selling their home, either
immediately or later on. You can also pay the debt back from another source if you want to.
You do not have to sell your home if you don’t want to. You may, for example, decide to
keep your home for the rest of your life and repay out of your estate, or you may want to rent
it out to generate income. If you do this, you will be expected to use the rental income to
increase the amount you pay each week, thus reducing the weekly payments made by the
Council, and minimising the eventual deferred payment debt.
12 Week Disregard
If you have been assessed as having eligible needs for residential or nursing care and own a
property, during the first 12 weeks stay in residential accommodation, the capital value of the
property is disregarded. This gives you the time to decide how you will meet your
contribution to the cost of your care and consider if you wish to enter onto the Deferred
Payment Scheme. It also allows time to make the necessary steps to put the Agreement into
place.
After 12 weeks, unless there is a statutory disregard of the property, the property is taken
into account as a capital resource. A statutory disregard will apply where, for example, the
property is occupied by a spouse, partner, or close relative who is incapacitated or aged 60
or over. At this point, if you have not expressed your interest to enter into the Deferred
Payment Scheme, the Council will charge for the full cost of your placement.
Charging Interest
The loan will have interest charged on it in the same way a normal loan would on money
borrowed from a bank. The Council will not charge more than the nationally-set maximum
interest rate that is fixed by the Government. Currently, the maximum rate to be charged is
based on the cost of Government borrowing. It will change every six months on 01 January
and 01 July every year to track the market gilts rate specified in the most recently published
report by the Office of Budget Responsibility. This interest will be compounded on a monthly
basis.
The interest will apply from the day you enter into the Deferred Payment Scheme and will
continue to be charged until the repayments have been made in full. You will receive a
statement every six months detailing the amount of fees deferred, interest and administrative
charges accrued to date, and of the total amount due and the equity remaining in the home.
Your Agreement with Tameside Council
If you decide to use the Deferred Payments Scheme, you enter into a legal agreement with
Tameside Council by signing an Agreement document. The Council then places what is
called a ‘legal charge’ on your property to safeguard the loan. You will be charged for this
expense within an administration set up charge.
The Agreement covers both the responsibilities of Tameside Council and your
responsibilities, one of which is to make sure that your home is insured and maintained. If
you incur expenses in maintaining your home while you are in residential or nursing care,
these maybe taken into consideration, in the calculation of your financial assessment. .
You can end the Agreement at any time, for example, if you sell your home, and the loan
then becomes immediately payable to the Council. Otherwise, the Agreement ends on your
death and the loan becomes payable 90 days later.
The Council will not cancel the Agreement without your consent.
Once the Agreement has ended the full amount of monies borrowed is due, this includes the
care costs deferred, interest accrued and administration charges, if they were added onto
the deferred debt. The full amount must be paid to Tameside Council and once payment
has been received the Council will release the charge placed against the property.
PLEASE NOTE:
If payments are not made when they are due, the Council may enter into legal proceedings
to reclaim the amount outstanding.
Costs associated with the Deferred Payments Scheme:
Tameside Council will charge an administration fee once the Deferred Payment Agreement
has been signed. The administration charge from 01 April 2015 is set at £600.00 which is
equal to the actual costs incurred in provision of the Deferred Payment Scheme. The
administration charge is applied only once at the start of the agreement.
The administration charge from 01 April 2015 is broken down as follows:
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Land Registration fees – £158.00
Valuations of the property – £350.00
Communications - £2.01
Processing - £89.99
The administration fee can be paid in full when you enter into the Deferred Payment
Agreement or it can be added to the deferred amount.
If you choose to pay the administration fee at the time that you sign the Deferred Payment
Agreement, Tameside Council will issue a bill. If this bill is not paid within 28 days, the
Council will automatically defer the administration charge against the property.
Are you eligible to enter the Deferred Payment Scheme?
In order to qualify to enter the Deferred Payment Scheme you must meet the following
criteria:
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You must have needs that are to be met by the provision of care in a care home. This
is determined by your Social Worker who will assess your care and support
requirements.
Your current needs are being met in 24 hour supported living accommodation and
you own a property.
You must have less than, or equal to £23,250 in assets excluding the value of your
property.
Your home is not otherwise disregarded from the financial assessment, for example,
it is not occupied by a spouse or dependent relatives.
Ensure your property is registered with the Land Registry, if the property is not, you
must arrange for it to be registered (at your own expense).
Have mental capacity to agree to a Deferred Payment Agreement or have a legally
appointed agent, willing to agree this.
Whilst in the Agreement, you will also need to:
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Have a responsible person willing and able to ensure that necessary maintenance is
carried out on the property to retain its value (you are liable for any such expenses).
Have appropriate building insurance in place to cover the value of your property, at
your own expense.
Pay any client contribution in a timely and regular manner; if you fail to pay the client
contribution on a regular basis, Tameside Council reserves the right to add this debt
to the loan amount.
There can be no other beneficial interests on the property, for example, outstanding
mortgages or equity release schemes, unless this is approved by the Council.
Where a person may lack the capacity to request to enter into the Deferred Payment
Scheme, a person with legal authority being either a Deputy or a person with a relevant
Enduring Power of Attorney or Lasting Power of Attorney, may request to enter on the
Deferred Payment Scheme on their behalf. If the family member/representative doesn’t
have legal authority to act on the person’s behalf, then the family member would be advised
by the Council to seek legal advice about applying for Lasting Power of Attorney or
Deputyship Order.
The Council can provide you with information and advice on options for Deputyship, Lasting
Power of Attorney and advocacy.
If you do not meet all of the above criteria, the Council can use its discretion to offer a
Deferred Payment Agreement to people who do not meet the criteria taking into account the
persons individual circumstances.
PLEASE NOTE:
Acceptance of any application under the Scheme is subject to you meeting the criteria for
entering the Scheme, and the Council being able to obtain security in your property.
Entering into the Deferred Payment Scheme
When entering into the Deferred Payment Scheme the Council will consider how much you
can defer. This is called the equity limit, which is the total amount that can be deferred. In
order to assess the equity limit, the Council will obtain a valuation of the property. The equity
limit will be set at the property value, minus 10%, minus the lower capital limit which is
currently £14,250.00. The equity limit may change if the value of your property changes.
When you reach 50% of your equity limit, the Agreement will be reviewed and a further
valuation of the property will be obtained. The property valuation fees are included in the
administration charge. Once payments have been deferred to the equity limit the Council will
refuse to defer any further charges. Interest on the amount deferred will continue to be
charged.
You will be assessed to contribute a weekly charge towards the cost of your care based on
your income and any savings. However, upon entering the Agreement, the Council will allow
you to exclude up to a maximum of £144.00 per week, which you may choose to retain and
therefore deduct from the assessed weekly contribution. This is called the Disposable
Income Allowance. If you choose to keep it, and therefore exclude an amount up to £144.00
per week from the financial assessment, this amount will be deferred against your property.
If you decide to rent your property during the course of the Deferred Payment Agreement,
the rental income will be taken into consideration for your assessed weekly contribution;
however, the Council will allow you to keep 25% of the rental income.
By choosing to rent your property and pay a higher weekly contribution, this will result in a
smaller sum of charges deferred against your property.
The Council will use its discretion on a case by case basis where a Third Party Top Up is
requested to be part of the Deferred Payment Agreement, as the Council will need to see
that the Deferred Payment Agreement can be sustained.
PLEASE NOTE:
Once you have signed up to the Agreement, you must inform the Council if any of your
circumstances or your interests in the property changes.
Benefits and Deferred Payments
Whilst participating in a Deferred Payments Agreement, entitlement to Attendance
Allowance continues. If your property is up for sale then you may also be able to continue
claiming means-tested benefits such as Pension Credit, subject to your other capital. This is
because a property is disregarded for benefit purposes if reasonable steps are being taken
to sell it, although this disregard will be reviewed after 26 weeks. If reasonable steps are not
being taken to sell the property, then it is likely the Department for Work and Pensions
(DWP) will consider its value and this may reduce or cease your entitlement to Pension
Credit.
Circumstances in which the Council may stop deferring care costs
There are circumstances when the Council may refuse to defer any more charges due to the
following reasons:
a) If your total assets fall below the level of the means-test, and you become eligible for
the Council to support in paying for your care;
b) If you no longer have the need for care in a care home.
c) If you breach the terms of the contract; or
d) If, under the Charging Regulations, the property becomes disregarded for any reason
and therefore you consequently qualify for the Councils support in paying for your
care.
e) If you reach the ‘equity limit’ that you are allowed to defer or if you no longer receive
care and support in a care home setting.
Interest will continue to accrue on the amount deferred until the Agreement is terminated
(either by sale of the property, if you die, or by the Council being repaid separately).
The Council will endeavour to provide a minimum of 30 days advance notice that further
deferrals will cease; and will give you an indication of how your care costs will need to be
met in future. Depending on your circumstances, you may either receive support from the
Council in meeting the costs of your care, or you may be required to meet your costs from
your income and assets.
Advantages of using the Deferred Payments Scheme
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It can prevent you having to pay for your full care costs up front, as a proportion of
the care costs are deferred and paid by the Council.
Attendance Allowance can still be claimed during such deferment.
You will benefit from any growth in the value of the property.
It may be possible to let the property and contribute the rent towards the fees.
The decision to sell the property can be deferred whilst all options are being
considered.
If your stay in the care home turns out to be for just a small period then the amount of
debt accrued may be small enough for you or your family to pay off and therefore
there may be no need to sell the property.
Disadvantages of using the Deferred Payments Scheme
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You will still need to pay upkeep on the property.
The property must remain insured. This in itself may be a problem as home
insurances may not cover an undefined period of non-occupancy.
The loan is only deferring a liability repayable from the eventual proceeds of the
property and the Council will charge monthly compound interest on the loan.
Letting property can be troublesome and rental income is taxable.
You should take independent financial and legal advice to help you decide which course of
action will be financially better for you.
Other options to consider
You may choose to rent out your property, which could give you enough income to cover the
full cost of your care. There are advantages to this as you will not accrue a debt, be liable for
interest and administrative charges and your property will be occupied. Your tenant will be
paying utilities and Council Tax, which will reduce your outgoings.
There are also various equity release products which may be suitable for your personal
circumstances.
You may also choose to pay the full cost of your care from your available income and
savings/assets; or a family member may choose to pay some or all of this for you.
PLEASE NOTE
You should take independent financial and legal advice to help you decide which course of
action will be financially better for you.
Independent Financial Advice
Before making any decisions to sign into the Deferred Payment Agreement, you may wish to
seek independent advice. Support is available from the following organisations;
Money Advice Service is run by the Consumer Financial Education Body, provides
unbiased and independent advice and information regarding your finances. The website has
interactive toolkits to help you make educated decisions about their finances.
Citizens Advice Bureau provides free, confidential advice and is open to everyone in the
community.
Tameside Welfare Rights provides advice to Tameside residents on a range of benefit and
tax credit entitlements.
Age UK Tameside provides free assistance with welfare benefits and financial issues.
Society of Later Life Advisers (SOLLA) is a not-for-profit organisation which provides
information on financial advisers who specialise in the later life market.
If you wish to apply for the Deferred Payment Scheme contact;
The Adults Finance Service at Tameside Council on 0161 342 3220.