Deferred payment agreements slide pack

Report
Deferred payment
agreements
Care Act 2014
Outline of content
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Introduction
Eligibility for a deferred payment
Information and advice
How much can be deferred?
Making the agreement
Interest rates and charges
Termination of the agreement
Summary
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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 scheme
 By taking out a deferred payment agreement (DPA), a person can
‘defer’ or delay paying the costs of their care home until a later date
 A 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 so
 Payment is deferred and not ‘written off’. This must be stressed to the
individual
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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:
Income,
including
pension
A financial
product
Savings or
other assets
A Deferred
Payment
Agreement
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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 care
 Who 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 relative
 However, 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 security
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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 security
 The security should be revalued periodically
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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 support
 If a person is narrowly not eligible e.g. because they have slightly
more than the asset threshold
 Local authorities may offer DPAs to people in extra care settings in
some circumstances
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Refusing a deferred payment
agreement
 A local authority may refuse a request for a DPA in certain
circumstances
 This 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
property
 someone wishes to defer a larger amount than they can sustainably
afford
 a person’s property is uninsurable and
they are unable to provide adequate security
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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 costs
 where 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 made
 where a relative who was living in the property at the time of the
agreement subsequently becomes a dependent relative
 Local 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 defer
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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 DPA
 The explanation should include:
 The criteria for obtaining a DPA and the requirements
 Interest and admin charges
 The types of security that the authority is prepared to accept
 Implications for income, benefit entitlements and charging
 Termination of the DPA and options for repayment
 What happens if the person doesn’t repay
 The overall advantages and disadvantages of DPA
 The suggestion that people may want to consider taking
independent financial advice.
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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 advocacy
 Advise people that they will need to consider how they plan to use,
maintain and insure their property
 Keep people informed about the DPA as it continues and provide
necessary information on termination
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How much can be deferred?
Security
Sustainability
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Making the agreement
When
With
whom
Documentation
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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
deferred
 Local authorities should maintain a publicly-available list of
administration charges that a person may be liable to pay
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Termination of the deferred
payment agreement
Voluntary
repayment
Sale of property
/security
Death
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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, and
 will agree to the DPA terms and conditions
 Additionally, local authorities have a fairly broad discretion including:
extending DPAs to extra care settings; agreeing top-ups; and of the
security they will accept
 The amount that can be deferred is dependent on there being adequate
security, and whether the amount deferred is sustainable
 Interest on deferred costs, and administrative costs can be charged, but
the scheme should run on a cost neutral basis
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