Deferred Payment Arrangements

A deferred payment agreement (DPA) is not an annuity but is an arrangement offered by Local Authorities to allow homeowners who:

Are assessed as needing care in a care home.
Have less than currently £23,250 in England, £50,00 in Wales or £22,000 in Scotland (2025/6) remaining in non-property assets and savings,

to continue receiving their care until they sell their home.

Your Local Authority agrees to pay your fees on your behalf in return for you or your Personal Representative paying them most of your pensions, all of your state benefits and most, if not all, of any letting income you may decide to earn by letting out the home. They will then secure the money lent as well as the interest your Local Authority will charge, by creating a legal charge against your property so they can recover their money as soon as you do sell the home, or you die.

As you are still deemed to be a self-funder, your Local Authority should be willing to pay the full or “private” rate for your chosen/current care home, not just the Local Authority rate, so you shouldn’t need to move homes, and avoid you asking your family to fund your fees for you whilst waiting to sell your home.

What Are The Advantages and Disadvantages of Using a Deferred Payment Arrangement?

Pros and Cons of Buying an Immediate Needs Annuity

Advantages of using a Deferred Payment Arrangement :

It will allow you to continue affording your care whilst you wait to sell your home, die, or the debt exceeds 80% of your home value, whichever is the earliest.
If you are willing to let, it can also allow you benefit from earning additional income to put towards your fees avoiding your debt from escalating too fast.
The person needing care will continue receiving any Attendance Allowance/ Disability Benefit or Personal Independence Payment
Although your Local Authority will charge interest, it is normally significantly less than commercial rates, or Equity Release.

Disadvantages of a Deferred Payments Arrangement:

Your or your representatives remain responsible for insuring the property and maintaining it.
Not normally available if the property is non-standard or have outstanding mortgage, or Equity Release secured on it.
Should you let the property, you will have landlord responsibilities, incur income and potentially Capital Gains Tax should you remain a landlord for more than currently 3 years – but liable to change.
• You will need to repay the debt withing 60 days of dying normally by selling it so family cannot inherit the home.

In Summary

A Deferred Payment Arrangement can be a useful way of continuing to fund care, especially if you are having difficulty in selling it, need more time to make it ready to market, or are willing to or are already letting it and you feel care will only be required for a short period.

If, however, no one lives near the property or wants the ongoing responsibilities of being a landlord and having to maintain the property, you may simply prefer to sell it, receive the proceeds, consider investing the money and pay-as-you-go.

Alternatively, if you feel the person needing care may require care for some time and/or want to cap or limit the lifetime cost, you may prefer an immediate needs annuity.

If you would like to learn more about what an immediate needs annuity is and how they can be used to fund care, visit immediate need annuities.

Which method is right for you?

This will depend on many factors including your circumstances, view of life expectancy, cost of care, and desire to cap any cost to provide certainty over future inheritances.

Your adviser would be pleased to make recommendations for you.

Why not arrange a consultation today …

Advice on Care

Your experts on paying for care

Call free on:

0800 180 4336

Here to help:
Monday to Friday 9am to 8pm, Saturdays 9-1pm