When it comes to elderly care funding, there are a number of options to help with financing senior care. Deferred Payment Agreements are a good option for those with equity stuck in properties, and those who do not have many savings otherwise.
However, there are advantages and disadvantages of Deferred Payment Agreements, and it’s always worth weighing up the pros and cons of all financing options, before committing to one.
Advantages of choosing a Deferred Payment Agreement
Deferred Payment Agreements give the opportunity to be more selective with your care options. For example, if you were to choose a care home like the premium, purpose-built homes which Barchester offer, with great facilities, a fantastic quality of life and welcoming environment, that is more expensive than what the council would usually fund – you might be able to defer the additional costs for the care home, too.
This means that you could have more choice over the type of care home you would like.
Another benefit of Deferred Payment Schemes is that your care home fees will be paid for without you needing to sell your property in your lifetime, if you wish. Alongside this, if you find another source to pay for your agreement when it ends, you might not even need to sell your property at all.
Additionally, if your property increases in value over the lifetime of your DPA, this could help to offset your deferred debts.
Some people may wish to rent out their home during the period of their agreement, which again can help to offset any deferred costs. Some councils do have rules on renting whilst your house is being used as leverage for your Deferred Payment Agreement, so it’s always worth checking before you agree to rent out your property.
Funded Nursing Care (FNC)
If your care needs are assessed and you require nursing care, your overall weekly fee will increase to cover these care needs. However, you may be entitled to FNC which the local integrated Care Board (part of the NHS) may pay for. If this payment is agreed by your ICB, the ICB pays FNC directly to the home.
Finally, individuals can still receive disability benefits such as Attendance Allowance and Personal Independence Payments (PIP) whilst deferring care costs. These are counted as income when your weekly contributions to your care is worked out, and therefore will help to reduce the amount you need to defer.
Disadvantages of using a Deferred Payment Agreement
There are a number of things to think about before agreeing to deferred payments. You will be expected to maintain your property to ensure that it doesn’t depreciate in value, which would negatively impact your agreement.
You’ll also be expected to keep your home insured – even if it’s empty – for the duration of your agreement.
Financially, the implications of set up fees, annual administration charges and interest rate on your deferred debts might be off putting. It’s worth taking into consideration the potential for any additional costs outside of the agreement.
If the value of your property decreases, you could also be left with less equity once the debt is repaid.
For those considering renting their property whilst they’re in a care home, the responsibility of being a landlord is something to think about. You’ll need to ensure that your property meets legal requirements for rental properties, maintain the properties standard, and answer any enquiries, concerns and potential repair requests from your tenant(s).
How to apply for a Deferred Payment Agreement
If you or a loved one have had a needs assessment, and have been told that you need to move into residential care, you can then contact your local authority to request a Deferred Payment Agreement.
The entire process will rely on your local authority’s regulations and processes, and it might take a few months to get things set up. With that said, your council will likely disregard the value of your property for the first 12 weeks of your residential care stay in order to give enough time for the agreement to be organised.
Key considerations when applying for a Deferred Payment Agreement
There are a number of things to consider when applying for a Deferred Payment Agreement, including the advantages and disadvantages listed above.
For those who already live in a care home, it is possible to apply for a Deferred Payment Agreement via your local council. There is no limitation on the timeframe in which you are allowed to apply, and those who went into care before DPA’s were in existence (pre-2015) may want to assess deferred payments as an option for continuing to pay for their care. Anyone entering into an agreement is allowed to keep some income back in order to pay for costs that might crop up to maintain their home. This is called a Disposable Income Allowance (DIA) and is currently set at £144 per week.
Repaying a Deferred Payment Agreement
The money owed on an agreement must always be repaid if you choose to sell your home. This includes any interest, administration and legal charges which have incurred over the period of the agreement.
If you or your loved one passes away, the organisation of payment falls on the executor of your will. They will be responsible for paying the amount owed either 90 days after the date of death, or on the date in which the property is sold or disposed of.
Again, the regulations behind repayments can change depending on your local authority, and some may even give a longer period for the executor to pay, if there are any difficulties in repaying – though it’s always worth speaking with them to ascertain what their rules are.
Alternatives to Deferred Payment Agreements for senior care financing
If a Deferred Payment Agreement isn’t an option for you or your loved one, there are a number of alternatives for financing senior care.
Self-funding is an option, which means utilising savings or other owned assets to help pay for care. Self-funders are still entitled to some government support including Attendance Allowance and PIP – where relevant.
If you’re in a position to sell your house, both this and equity release are good options – especially for those already living alone. If you’re looking to release equity or sell your home to pay for care however, it’s important to think about if this will affect your spouse, or any other family members.
A long-term care annuity or immediate needs annuity can secure a guaranteed income with a care funding plan in order to pay for your care fees.
Other alternatives include local-authority funded care, though this is measured against your assets, and depends entirely on what you already have in savings and in property. The NHS does fund some care, though this is limited and you will need to undergo assessments by healthcare professionals to understand what help you might need and any risks to your health.
Additional resources and information on Deferred Payment Agreements
When it comes to making a decision about elderly care funding and elderly care options, it’s always best to first talk to family and friends about any decisions you make.
If you decide that a Deferred Payment Agreement is the best way forward for you or a loved one, your local authority is the best port of call in the first instance. You’ll be required to have a needs assessment before discussing an agreement, but this can be organised through your local authority or your GP.
It’s also worth doing as much research as possible before speaking with your local council, including current means-tested thresholds.