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Personal Law Services > Care Funding > Care Funding: Useful Guides > A Guide to Deferred Payment Arrangements

A Guide to Deferred Payment Arrangements

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Paying for long-term care can be a significant financial concern for individuals and their families. For many people, a large proportion of their wealth is tied up in their home, making it difficult to access funds immediately to pay care home fees.

A Deferred Payment Arrangement (DPA) is designed to help in these circumstances by allowing eligible individuals to delay paying some of their care costs until a later date.

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What is a Deferred Payment Arrangement?

A Deferred Payment Arrangement is an agreement between an individual and their local authority that allows care home fees to be deferred.

Under the arrangement, the local authority pays part of the care home fees on the individual’s behalf. The amount paid by the local authority accumulates as a debt, which is usually secured against the person’s property.

The debt is typically repaid when the property is sold or from the individual’s estate at a later date.

A Deferred Payment Arrangement can help prevent a person from having to sell their home immediately to fund their care.

Who Can Apply for a Deferred Payment Arrangement?

Eligibility will depend on an individual’s circumstances, but generally a Deferred Payment Arrangement may be available where:

  • The individual is receiving permanent residential care.
  • They have a property that is not subject to a mandatory property disregard.
  • Their available capital, excluding the value of their home, is below the relevant financial threshold.
  • They have sufficient equity in their property to secure the deferred debt.

The local authority will assess each case individually before deciding whether a Deferred Payment Arrangement can be offered.

How Does the Financial Assessment Work?

When assessing a person’s ability to contribute towards their care costs, the local authority will consider their income, savings and capital.

Currently:

  • The first £14,250 of savings and capital is disregarded.
  • Capital between £14,250 and £23,250 is treated as producing a notional or “tariff” income of £1 per week for every £250 (or part thereof).
  • Individuals with capital above the upper threshold are generally expected to fund their own care costs, subject to the treatment of their property.

The local authority will calculate how much the individual can contribute from their income, which may include pensions and certain benefits.

The authority then pays the difference between that contribution and the agreed cost of care. This amount is added to the deferred debt.

How Does the Local Authority Calculate the Property Value?

The local authority will usually obtain a valuation of the property to determine how much equity is available to secure the deferred payment.

When carrying out the assessment, an allowance may be made for the costs associated with selling the property, often by reducing the property’s value to reflect estimated sale expenses.

The amount that can be deferred will depend on the available equity after taking account of any mortgages, charges or other secured debts.

What Happens When the Property is Sold?

When the property is eventually sold, the deferred debt is repaid to the local authority from the sale proceeds.

This repayment will usually include:

  • Deferred care fees paid by the local authority.
  • Any administration charges permitted under the agreement.
  • Interest, where applicable.

The remaining proceeds belong to the individual or their estate.

Many people are unaware that the value of their home should normally be disregarded during the first 12 weeks of permanent residential care.

This temporary disregard can provide valuable breathing space while longer-term funding arrangements are considered.

It is important to ensure that the local authority has correctly applied this disregard before entering into any Deferred Payment Arrangement.

When Should a Property Be Disregarded Completely?

In some situations, the value of a property should not be included in the financial assessment at all.

This may apply where the property continues to be occupied by:

  • A spouse or civil partner.
  • A relative aged 60 or over.
  • A disabled relative.
  • Certain other qualifying individuals.

Where a mandatory property disregard applies, a Deferred Payment Arrangement may not be necessary.

Jointly Owned Property

Special care should be taken where a property is jointly owned.

Local authorities will sometimes assume that a person’s share is worth 50% of the market value. However, this may not always reflect the true value of the beneficial interest.

Depending on the ownership arrangements and the rights of any co-owner, the value attributable to the resident may be significantly reduced and, in some cases, may be negligible.

Independent legal advice should always be sought where jointly owned property forms part of a care funding assessment.

Benefits During a Deferred Payment Arrangement

Many individuals remain entitled to certain benefits while a Deferred Payment Arrangement is in place.

In particular, Attendance Allowance may continue to be payable during the deferral period, depending on the circumstances.

It is important to ensure that all available benefits are being claimed to maximise income and reduce the impact of care costs.

Reviewing the Deferred Debt

The local authority should regularly review the value of the property and the level of deferred debt.

If the remaining capital available to the individual falls below the relevant financial threshold, the local authority should carry out a further financial assessment to determine whether additional financial assistance should be provided.

Considering Other Funding Options

A Deferred Payment Arrangement is only one of several ways to fund care.

Depending on the individual’s circumstances, other options may include:

  • Care fees annuities.
  • Independent financial planning.
  • NHS Continuing Healthcare funding.
  • NHS-funded Nursing Care.
  • Asset protection and estate planning strategies.

Every person’s situation is unique, and obtaining specialist advice can help ensure the most appropriate funding solution is identified.

Need Specialist Advice?

Care funding rules can be complex, particularly where property ownership, benefits, trusts, or changing health needs are involved.

Our specialist Care Funding and Court of Protection team can advise on Deferred Payment Arrangements, care home funding assessments, NHS Continuing Healthcare eligibility, property disregards, and challenges to local authority decisions.

We can help you understand your options and ensure that you receive all available funding and financial support.

Frequently Asked Questions (FAQs)

What is a Deferred Payment Arrangement?

A Deferred Payment Arrangement allows eligible individuals to delay paying part of their care home fees. The local authority pays the fees on their behalf and recovers the cost later, usually from the sale of the individual’s property.

Do I have to sell my home to pay for care?

Not necessarily. A Deferred Payment Arrangement may allow you to delay selling your property while care fees are paid by the local authority and secured against the home’s value.

What is the 12-week property disregard?

The value of a person’s home is normally ignored for the first 12 weeks after they permanently enter residential care, giving time to consider longer-term funding options.

Can I still receive Attendance Allowance during a Deferred Payment Arrangement?

In many cases, yes. Attendance Allowance may continue while a Deferred Payment Arrangement is in place, depending on the individual’s circumstances.

What happens if my spouse still lives in the property?

If a spouse or civil partner remains living in the property, the home’s value is usually disregarded entirely for care fee assessment purposes.

How is a jointly owned property valued?

The value of a jointly owned property is not always simply 50% of the market value. The correct valuation depends on the beneficial interest being assessed and the rights of any co-owner.

Does the local authority charge interest on a Deferred Payment Arrangement?

Local authorities are generally permitted to charge interest and administration fees under Deferred Payment Arrangements. The terms should be explained before the agreement is entered into.

What happens when the property is sold?

The deferred debt, together with any applicable interest and charges, is repaid to the local authority from the sale proceeds. Any remaining funds belong to the individual or their estate.

Can I receive NHS funding instead of paying for care?

Possibly. If your health needs are significant, you may qualify for NHS Continuing Healthcare or NHS-funded Nursing Care. Eligibility should be reviewed if your care needs change.

Should I seek legal advice before entering a Deferred Payment Arrangement?

Yes. Specialist legal advice can help ensure that property valuations, benefit entitlements, ownership arrangements and funding options have all been properly considered before entering into an agreement.