Deferred payments
A deferred payment agreement is an option for paying for your care if you are a homeowner with limited savings or other capital.
It is a loan from the council to pay care home costs, which is secured against your home with a legal charge. The amount you can borrow depends on the value of your home and the equity you have in it.
You may be eligible for a deferred payment agreement if:
- you have eligible needs for permanent care in a care home, and
- your capital or savings (not including the value of your home) are less than £23,250, and
- you don’t qualify for an ongoing property disregard.
You can apply for a deferred payment agreement when:
- you first move into permanent care, or
- your funds drop below £23,250 if you are already living in permanent care.
When you have a deferred payment agreement, each month:
- you pay your client contribution to the council
- the council pays the amount agreed in the deferred payment agreement
- anyone paying a top up (see below) pays the amount agreed by the council.
Every month, care costs paid by the council are added to your debt to the council. Interest and other council charges (such as administration fees) are also added unless you have agreed to pay these separately. This means that your debt to the council increases over time.
You can repay the debt at any time, but it must be repaid when you sell your home.
You may decide not to sell your home during your lifetime, but the debt must be repaid within a fixed period after death.
How a deferred payment works
To be eligible to use the deferred payment scheme, you must:
- Have capital of less than £23,250 (excluding the value of your property)
- Be professionally assessed as requiring and be entering permanent residential/nursing care in a registered care home
- Legally own or part-own a property which is not benefitting from a property disregard
- Ensure that your property is registered with the Land Registry (if the property is not registered then 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 representative willing to agree this on your behalf.
To be eligible to use the deferred payment scheme, you must:
- Have capital of less than £23,250 (excluding the value of your property)
- Be professionally assessed as requiring and be entering permanent residential/nursing care in a registered care home
- Legally own or part-own a property which is not benefitting from a property disregard
- Ensure that your property is registered with the Land Registry (if the property is not registered then 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 representative willing to agree this on your behalf.
You can apply for a deferred payment agreement when:
- you first move into permanent care; or
- your funds drop below £23,250 if you are already living in a care home.
You can apply for a deferred payment agreement when:
- you first move into permanent care; or
- your funds drop below £23,250 if you are already living in a care home.
The total amount you can defer will be governed by an ‘equity limit’ which may change if the value of your home changes. We may cease to defer further amounts when you reach your equity limit or qualify for support in paying for your care.
The total amount you can defer will be governed by an ‘equity limit’ which may change if the value of your home changes. We may cease to defer further amounts when you reach your equity limit or qualify for support in paying for your care.
You will enter into a legal agreement with the council by signing a ‘deferred payment agreement’ and ‘legal charge’. The legal charge will then be registered at HM Land Registry to safeguard the loan.
The agreement covers both the responsibilities of us and your responsibilities, one of which is to make sure that your home is insured and maintained.
You will enter into a legal agreement with the council by signing a ‘deferred payment agreement’ and ‘legal charge’. The legal charge will then be registered at HM Land Registry to safeguard the loan.
The agreement covers both the responsibilities of us and your responsibilities, one of which is to make sure that your home is insured and maintained.
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. We cannot cancel the agreement without your consent.
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. We cannot cancel the agreement without your consent.
We will charge an administration fee (currently £500) to set up the deferred payment agreement and an annual administration fee (currently £100 per year) will also be payable.
Interest will be charged on these fees unless you choose to pay them as they become due.
We will charge an administration fee (currently £500) to set up the deferred payment agreement and an annual administration fee (currently £100 per year) will also be payable.
Interest will be charged on these fees unless you choose to pay them as they become due.
We will charge interest on the deferred payment in the same way as a normal loan. The interest rate will be the market gilts rate plus 0.15% and will be compounded and applied daily. The market gilts rate is variable and is as specified by the Office of Budget Responsibility normally before 1 January and 1 July each year.
You will receive a statement every six months advising you how your charge is being calculated and what the outstanding sum on your deferred payment account is.
We will charge interest on the deferred payment in the same way as a normal loan. The interest rate will be the market gilts rate plus 0.15% and will be compounded and applied daily. The market gilts rate is variable and is as specified by the Office of Budget Responsibility normally before 1 January and 1 July each year.
You will receive a statement every six months advising you how your charge is being calculated and what the outstanding sum on your deferred payment account is.
The debt which will need to be 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.
The debt which will need to be 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 us and minimising the eventual deferred payment debt.
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 us and minimising the eventual deferred payment debt.
The local authority’s debt recovery process will be followed if the debt is not repaid when it becomes due.
The local authority’s debt recovery process will be followed if the debt is not repaid when it becomes due.
Advantages of the scheme
- We will pay some of your care home costs, so you don’t need to find the money straight away
- You will still own your home whilst you are in care, therefore you will continue to benefit from any rise in house prices, effectively paying towards your care costs
- The cost of the loan from us only builds for as long as you are in care. If, unfortunately, your condition is terminal and you only need access to care for a short period of time, this may be a worthwhile option for you
- It might be possible to let your property and use the rent towards your fees
- You can carry on claiming attendance allowance, disability living allowance (care component), or Personal Independence Payment (PIP) (daily living component) if you’re entitled to any of these benefits
Disadvantages of the scheme
- You will still have to pay for the upkeep and maintenance of your home
- You will have to keep your home insured at your expense, and this might be a problem if no-one is living there
- If you still have a mortgage on the property you will have to carry on paying it
- House prices could fall leaving you with less money to pay back the fees
- If you already have an existing equity release scheme you might not be able to join the deferred payment scheme.
Advantages of the scheme
- We will pay some of your care home costs, so you don’t need to find the money straight away
- You will still own your home whilst you are in care, therefore you will continue to benefit from any rise in house prices, effectively paying towards your care costs
- The cost of the loan from us only builds for as long as you are in care. If, unfortunately, your condition is terminal and you only need access to care for a short period of time, this may be a worthwhile option for you
- It might be possible to let your property and use the rent towards your fees
- You can carry on claiming attendance allowance, disability living allowance (care component), or Personal Independence Payment (PIP) (daily living component) if you’re entitled to any of these benefits
Disadvantages of the scheme
- You will still have to pay for the upkeep and maintenance of your home
- You will have to keep your home insured at your expense, and this might be a problem if no-one is living there
- If you still have a mortgage on the property you will have to carry on paying it
- House prices could fall leaving you with less money to pay back the fees
- If you already have an existing equity release scheme you might not be able to join the deferred payment scheme.
Everyone is encouraged to seek unbiased, expert advice from independent financial advisers to help work out how to pay for long-term care. You can visit www.yourcircle.org.uk for more information on paying for care.
- SOLLA (Society of Later Life Advisors) helps people and their families to find trusted accredited financial advisers who understand financial needs in later life. You can call their helpline on 03332 020454.
- The Care Advice Line is a free information and advice service for adults and their carers in Gloucestershire. You can call their helpline on 01452 222200.
Everyone is encouraged to seek unbiased, expert advice from independent financial advisers to help work out how to pay for long-term care. You can visit www.yourcircle.org.uk for more information on paying for care.
- SOLLA (Society of Later Life Advisors) helps people and their families to find trusted accredited financial advisers who understand financial needs in later life. You can call their helpline on 03332 020454.
- The Care Advice Line is a free information and advice service for adults and their carers in Gloucestershire. You can call their helpline on 01452 222200.
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