Information about the deferred payments scheme, how it works and how to apply for it.
Deferred payment scheme
About the Deferred Payments scheme
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. You need to have your care needs assessed and your financial eligibility determined before a Deferred Payment Agreement can be considered.
How it works
The scheme offers you a loan from North Lincolnshire Council using your home as security. It doesn’t work in exactly the same way as a conventional loan. We will not give you a fixed sum of money when you join the scheme, but will pay 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.
We pay the part of your weekly care costs that you can’t afford whilst your home is your main asset. This is called 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.
You do not have to sell your home if you do not 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, reducing the weekly payments made by us, and minimising the eventual deferred payment debt.
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. It is based on the cost of central government borrowing, and will routinely change on 1 January and 1 July every year.
The rate applicable is 1.05 per cent from 1 July 2020 to 31 December 2020. This interest will be compounded on a daily basis. The interest will apply from the day you enter into the Deferred Payment Scheme.
You will receive statements annually as a minimum, advising you how your charge is being calculated and what the outstanding sum on your deferred payment account is.
If you decide to use the Deferred Payments Scheme, you enter into a legal agreement with us by signing an agreement document. We then place a ‘legal charge’ on your property to safeguard the loan which is included in the administration costs for setting up the agreement.
The agreement covers both our responsibilities and your responsibilities. For example, you will have to make sure that your home is insured and maintained. If you incur expenses in maintaining your home while you are in a care home, 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, the interest and any legal and administrative charges relating to it then become payable immediately.
Otherwise the agreement ends when you no longer need to receive care services and the finances tied up in your home are released by your estate to repay the loan.
Normally it will be the difference between the cost of your care home service and the amount you can afford to pay from your income and savings.
You can ask the council if you can add the cost of an existing ‘top up’ payment to your Deferred Payments Scheme loan. The council will consider the circumstances and check there is enough equity in your home. A third party ‘top up’ agreement is where a family member (or other person) puts additional money towards the cost of your care home placement.
You can also decide to add our administration charge and the cost of the property valuation to the amount deferred.
You should take independent financial and independent legal advice to help you decide which course of action will be financially better for you.
There are one off legal and administration costs of £250 for setting up a deferred payment agreement. The cost of a professional valuation of your property if undertaken by us in £200.
The interest rate and administrative fee will cover our costs.
To qualify for the council’s Deferred Payments Scheme you should:
- Have capital – excluding your property – of less than £23,250
- Be professionally assessed as requiring long-term residential care or 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
- Declare any other beneficial interests on the property, for example outstanding mortgages or equity release schemes – we will assess such interest.
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 service user contribution in a timely and regular manner; if you fail to pay the service user contribution on a regular basis we reserve the right to add this debt to the loan amount.
Acceptance of any application under the scheme is subject to you meeting the criteria for entering the scheme, and us being able to obtain security on your property.
In most cases the value of the property will be disregarded for the first 12 weeks of your stay in long-term care. The agreement will start from the thirteenth week onwards.
We can explain the scheme to you but cannot help you choose. We will not influence you. You should take independent financial and independent legal advice to help you decide which course of action will be financially better for you.
Renting your property:
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 the same debt. You will have reduced 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.
Pay for your care now rather than deferring payment:
You may also choose to pay the full cost of your care from your available income and savings or assets; or a family member may choose to pay some or all of this for you.
If you already receive council arranged care services speak to your case worker.
If you are already arranging or intend to arrange your own care home contract please contact our Access Team on 01724 297000.
For further information about deferred payment agreements, please see our list of Deferred payment agreement frequently asked questions [PDF, 164Kb].
If you are interested in applying to the Deferred Payments Scheme, please take independent financial advice to help you decide whether this is the best option for you.