Deferred payments and paying for a care home
When the Care Act came into effect, the way in which your council works out how much you can afford to pay towards the cost of a care home remained largely unchanged.
However in some cases your council now has a duty to offer you a deferred payment scheme when you move into a care home, meaning that you will not immediately need to sell your own home in order to pay for the care home - we provide some more information about how this scheme will work on this page.
What is a Deferred Payment Agreement (DPA)?
If you own your home property and are planning to move into a care home then you can make an agreement with your local council that will allow you to pay for some or all of your care costs at a later date.
This means that the council will not force you to sell your home during your lifetime to pay care bills.
And you can delay repaying the council until you choose to sell your home, or until after your death.
Westminster, Hammersmith and Fulham and Kensington and Chelsea councils have all offered DPAs to residents for some time, but the Care Act means that from April 2015 all councils will need to consider such an agreement when helping someone to arrange care and support.
Deferred payment agreements will not suit everyone's circumstances. You may be eligible for a deferred payment agreement if you:
- are receiving care in a care home, or will be moving into one soon - but importantly your council will need to agree that you have reached a stage when you need to move into a care home, and will complete an assessment with you to decide on this>
- own your own home (unless your partner or certain others live there); OR
- have savings and investments of less than £23,250 (not including the value of your home or your pension pot).
Use the Deferred Payment Agreement Calculator
As part of helping to understand what your options are for paying for care, a DPA calculator has been developed by local authorities with the Department of Health. The tool explains what a deferred payment agreement is, whether or not it would be an option available to you, and how much it would cost.
Try the DPA calculator here (please note that although the calculator is headed with the Hammersmith & Fulham logo, it applies to Kensington and Chelsea and Westminster residents too)
If you need care in a care home, but your spouse / civil partner lives in your home, then the council will disregard the value of the property from your financial assessment.
If you have agreed to defer your charge, the executor of your estate should arrange repayment of the money owed to the council, either by putting your home up for sale, or by raising funds in another way. This will usually need to be done within 90 days.
Set-up fee. If you live in Kensington and Chelsea or Westminster, then you will be charged a set-up fee of £500 and an annual administration fee of £100 to cover operational costs. If you live in Hammersmith & Fulham you will not be charged to set up the deferred payment arrangement.
Interest. Interest will be charged - by all three councils - on the deferred charge to cover the cost of lending and the risk associated with lending.
In Kensington and Chelsea and Westminster the interest rate charged will not be more than the national gilt rate plus the default component of 0.15%. The rate of interest applicable from 1 July 2018 is 1.85% and it may change twice a year in line with the gilt rate.
In Hammersmith & Fulham the rate of interest charged will be 1% plus the Bank of England Base rate applicable at the time. The actual rate of interest applicable from April 2018 is 1.5% and in the event of an increase will be no more than 1.85%