Paying for support

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 care from the thirteenth week of permanent residence 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 Stoke-on-Trent City Council using your home as security. It doesn’t work in exactly the same way as a conventional loan; the Local Authority 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 bill for as long as is necessary.

You will pay a weekly contribution towards your care that you have been assessed as being able to pay from your income and other savings. From the thirteenth week, you are entitled to claim Attendance Allowance or have it reinstated. The council pays the part of your weekly charge that you can’t afford until the value of your home is realised.

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.

However, 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. Your entitlement to claim Pension Credit may be affected if the property is not put on the market.

Charging interest

The loan will have interest charged on it in the same way a normal loan would be charged on money borrowed from a bank. The interest rate charged is fixed by the government, it is based on the cost of government borrowing and changes on 1 January and 1 July every year (you will be advised of the current interest rate at the time of your enquiry). The interest will be compounded on a 4 weekly basis and will apply from the day you enter into the Deferred Payment Scheme.

You will receive statements every 6 months advising you how your charge is being calculated and what the outstanding sum is on your deferred payment account.

If you decide to use the Deferred Payments Scheme, you enter into a legal agreement with the council by signing an agreement document. The council then places what is called a ‘legal charge’ on your property to safeguard the loan.

The agreement covers both the responsibilities of the 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 will be allowed for in the amount that you are assessed as contributing each week from your capital and income.

You can end the agreement at any time (for example if you sell your home) and the loan then becomes payable immediately.

Otherwise the agreement ends on your death and the loan becomes payable 90 days later.

The council cannot cancel the agreement without your consent.

Please note that a person will be unable to enter into a Deferred Payment Agreement if he/she lacks capacity. Any payments made by Stoke-on-Trent City Council to the provider will be invoiced to the person applying for deputyship and a letter of undertaking to pay the care fees must be signed by the person applying for the deputyship. Once the deputyship is obtained, the outstanding debt should be paid or resolved through a Deferred Payment Agreement.

Advantages of using the Deferred Payments Scheme

You should take independent financial and legal advice to help you decide which course of action will be financially better for you.

If there is an existing agreement for a third party ‘top up’, where a family member or other person puts additional money towards your placement, and you decide to take advantage of the Deferred Payments Scheme, you can add the cost of the ‘top up’ payments to your Deferred Payments Scheme loan if the council agrees that there is enough equity in your home.

The government’s rules say that ‘top ups’ for people not using the deferred payments scheme currently have to be paid for by somebody else – for example, a member of their family – so a deferred payment is currently the only way of paying the top up yourself without depending on a third party.

Costs associated with the Deferred Payments Scheme

There will be an administration charge of £229.

If other costs are incurred during the course of the agreement, there may be further one off charges; for example, a revaluation of a property.

Other options

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 in order to reduce the deferred amount and interest charged. We would normally advise that you use your capital down to £3000. Alternatively, a family member may choose to pay some or all of this for you.

You should take independent financial and legal advice to help you decide which course of action will be financially better for you.

In order to apply for the Deferred Payment Scheme you must:

• have capital (excluding the property) of less than £23,250 
• be professionally assessed as requiring and be entering permanent residential /nursing care in a registered care home 
• own or have part legal ownership of a property, which is not benefitting from a property disregard, and 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 a year’s worth of funding in the property 
• 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: 
• have a responsible person willing and able to ensure that necessary maintenance is carried out on the property to retain its value as you are liable for any such expenses 
• insure your property at your expense 
• pay any client contribution in a timely and regular manner; if you fail to pay the client contribution on a regular basis the 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 Stoke-on-Trent City Council.

Please note: Acceptance of any application under the scheme is subject to you meeting the criteria for entering the scheme, and Stoke-on-Trent City Council being able to obtain security in your property.

Where you can get independent advice

If you require general advice you can contact the following:

Money Advice Service

www.moneyadviceservice.org.uk 
Telephone: 0300 500 5000

Which

www.which.co.uk/elderly-care
Telephone: 01992 822 800

Age UK

www.ageuk.org.uk 
Telephone: 0800 169 6565

If you require more specialist advice you should contact an independent financial advisor.