Deferred Payment

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 – 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 Lancashire County Council using your home as  security. It doesn’t work in exactly the same way as a conventional loan – 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 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. 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. During the course of the DPA the Council  can allow you to retain a proportion of the rental income on the property  rental up to a maximum of 10%.  

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 maximum interest rate that will be charged is fixed by the government.

Currently the maximum rate to be charged is based on the cost of government borrowing, and will change on 1st January and 1st July every year. The Council currently charges 2.04 % from 1 January 2016 and 1.85% from 1 July 2016. This interest will be compounded on a 4 weekly basis.

The interest will apply from the day you enter into the Deferred Payment Scheme.

You will receive regular statements on a 6 monthly basis advising you how your charge is being calculated and what the outstanding sum on your deferred payment account is.

Your agreement with Lancashire County Council

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. You will be charged for this and other expenses.

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.

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 is a one-off administration charge of £500, which includes the cost of the 'land charge', arranging an independent property valuation and administering the account. The Council's legal department will write to you separately about  this charge if you decide to take out an agreement.

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; or 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 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, 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 the Council.

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.

Where you can get independent advice:

Two categories of financial advice are available:

Unregulated General Independent Financial Information and Advice - is typically provided through national call centres and websites and is usually free - but please check.

Regulated  Independent Financial Advice – is a fee-based, personalised advice service provided by the financial services industry which, depending on your circumstance may provide access to financial products which could support your care plans and financial goals.

It is important that you find a suitably qualified independent financial adviser and understand how much you will be required to  pay for their advice; this may be an hourly rate or a set fee. Lancashire County Council cannot recommend an individual adviser.

The Society of Later Life Advisers (SOLLA) is a national charity which provides support for people  to access regulated financial advisers who hold an enhanced accreditation in respect of later life and disability related issues.

SOLLA holds a national database of accredited advisers from which you may choose. SOLLA would suggest that you select three to talk to before making a final choice in order to ensure that they meet your personal requirements.

For further information about independent financial  advice ask for our fact sheet 'Funding your care and support needs - Independent Financial Advice'.

Please note: Lancashire County Council has supplied details of available Independent Financial Advice for your information only. The information is not exhaustive and other financial advisers are available. Lancashire County Council is not  responsible for the products, policies or services offered or approved by any external organisation or provider. The Council will not be responsible for damages or losses, however caused, or suffered by any person who relies on  information and advice provided by any external organisation or provider.

Applying for for the scheme

Telephone: 0300 123  6720

Financial assessment

  • Deferred Payment