Deferred - PowerPoint Presentation

Slide1

Deferred payment agreements

Care Act 2014Slide2

Outline of content

Introduction

Eligibility for a deferred payment

Information and advice How much can be deferred?Making the agreementInterest rates and chargesTermination of the agreementSummary

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Introduction

The Act places

a duty on all local authorities

to operate a deferred payment scheme and to offer deferred payments to people meeting the acceptance criteria for the schemeBy taking out a deferred payment agreement (DPA), a person can ‘defer’ or delay paying the costs of their care home until a later dateA deferral can last until death, however people may choose to use a deferred payment agreement as a ‘bridging loan’ to give them time and flexibility to sell their home when they choose to do soPayment is deferred and not ‘written off’. This must be stressed to the individual3Slide4

Paying for care and support

A person could meet the costs of their care and support from a combination of any of four primary sources

:

4Income, including pensionSavings or other assets

A financial product

A Deferred Payment AgreementSlide5

Who is eligible for a deferred payment agreement?

A deferred payment

agreement (DPA)

must be offered to anybody who has ‘adequate security’ and:Whose needs are to be met by the provision of residential careWho has less than the upper capital limit in assets excluding the value of their home Whose home is not occupied by a spouse or dependent relativeHowever, some discretion may be exercised – local authorities may offer DPAs to others who don’t meet the criteria, including people in supported living accommodation Permission may be refused in certain circumstances e.g. where there is insufficient security5Slide6

Adequate security

A local authority must have adequate security in place when entering into a

DPA

They must accept a ‘first legal mortgage charge’ as adequate security and they have discretion to accept other securityThe security should be revalued periodically 6Slide7

Exercising discretion

Local authorities can offer

DPAs to

people in residential care who do not meet the criteria. For example:If someone would like to use wealth tied up in their home to fund reasonable top-ups If someone has other accessible means to help them meet the cost of their care and supportIf a person is narrowly not eligible e.g. because they have slightly more than the asset thresholdLocal authorities may offer DPAs to people in extra care settings in some circumstances7Slide8

Refusing a deferred payment agreement

A local authority

may

refuse a request for a DPA in certain circumstancesThis is intended to provide local authorities with a reasonable safeguard against default or non-repayment of debt e.g. where:the local authority is unable to secure a first mortgage charge on the propertysomeone wishes to defer a larger amount than they can sustainably afford a person’s property is uninsurable and they are unable to provide adequate security8Slide9

Refusal to defer any more charges

A

local authority

may refuse to defer any more charges for a person who has an active DPA for example:when a person’s total assets fall below the level of the means test and the person no longer needs to defer their care costswhere a person no longer has relevant residential care (or where appropriate extra care) needs where a spouse or dependent relative has moved into the property after the agreement has been madewhere a relative who was living in the property at the time of the agreement subsequently becomes a dependent relativeLocal authorities must also cease deferring further amounts when a person has reached the ‘equity limit’ setting out the maximum that they they are allowed to defer9Slide10

Information and advice

The local authority

should

tell people about the DPA scheme and how it works, if they feel someone might benefit from having a DPAThe explanation should include:The criteria for obtaining a DPA and the requirementsInterest and admin chargesThe types of security that the authority is prepared to acceptImplications for income, benefit entitlements and chargingTermination of the DPA and options for repaymentWhat happens if the person doesn’t repayThe overall advantages and disadvantages of DPAThe suggestion that people may want to consider taking independent financial advice.10Slide11

Information and advice

The local

authority

should also:Consider potential issues around loss of capacity, and offer advice on options for deputyship, legal power of attorney and advocacyAdvise people that they will need to consider how they plan to use, maintain and insure their propertyKeep people informed about the DPA as it continues and provide necessary information on termination11Slide12

How much can be deferred?

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Making the agreement

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Interest rate and administration charge

The

DPA scheme

is intended to be run on a cost-neutral basis, with local authorities able to recoup: the costs they may incur in deferral of charges via an interest rate administrative costs associated with DPAs Local authorities will have the ability to charge interest on any amount deferredLocal authorities should maintain a publicly-available list of administration charges that a person may be liable to pay14Slide15

Termination of the deferred payment agreement

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Sale of property /security

Voluntary repaymentDeathSlide16

Summary

Local authorities have a duty to operate a deferred payment scheme and

are required to

offer DPAs when the person:has adequate security meets the acceptance criteria for the scheme, andwill agree to the DPA terms and conditionsAdditionally, local authorities have a fairly broad discretion including: extending DPAs to extra care settings; agreeing top-ups; and of the security they will acceptThe amount that can be deferred is dependent on there being adequate security, and whether the amount deferred is sustainableInterest on deferred costs, and administrative costs can be charged, but the scheme should run on a cost neutral basis16