Deferred Payment Agreements - FCA Regulated Product
We hold a licence with the Financial Conduct Authority to accept security for Deferred Payments offered under the City of York Council Deferred Payment Scheme.
Acceptable security for this product is an asset other than land or property that can be registered at the Land Registry, or an undertaking from a solicitor. This product may be beneficial where you wish to secure placement in a care home that makes an additional charge for a more costly room.
Deferred Payments are covered under legislation set out in sections 34 to 36 of the Care Act 2014, and the Care and Support (Deferred Payment) Regulations 2014 (as amended by the Care and Support (Deferred Payment) (Amendment) Regulations 2017).
Application of Deferred Payments is specified within the Care and Support Statutory Guidance.
- Deferred Payments
- Deferred Payments eligibility criteria
- Product details
- Maximum borrowing
- Interest payable
- Fees and charges
- Information and advice
- Reduced capacity to make decisions
- Support and monitoring
- Breach of Deferred Payment Agreement
- Termination of Deferred Payment Agreement
Deferred Payments
A Deferred Payment is a loan from the council which must be repaid.
Deferred Payments can only be used to purchase care in a care home where the person requiring care is deemed to meet the eligibility criteria for Deferred Payments and is a permanent resident in a care home.
Deferred Payments eligibility criteria
There are 3 criteria that must be met in all cases for Deferred Payments to be considered:
- that your care and support needs can only be met in a care home
- your capital, (excluding the value of your home) must be less than the Higher Capital Limit
- the equity value of the security must be able to sustain payment of care fees (other than your contribution from your income) for at least 139 weeks
There are additional criteria to be met to facilitate an offer of a Deferred Payment through The City of York Council Deferred Payment Agreement Scheme.
- your property cannot be disregarded for the purpose of the financial assessment (for example, it is occupied by a spouse or a dependant)
- that you can provide adequate security for the loan, other than a first legal mortgage charge
Adequate security could be a second legal mortgage charge on your property or a Letter of Undertaking from your Solicitor.
Other types of security could include but is not limited to:
- park homes
- life policies
- valuable jewellery, or art
Where the security is tangible, adequate insurance covering fire, theft or loss must also be in place throughout the lifetime of the agreement and until the loan is fully repaid.
Product details
The Benefits and Contributions Advisor will explain Deferred Payments to you.
If you are considering providing security other than land or property, you can request an illustration of how your security could provide you with funding support towards your care costs.
If you decide to proceed, you will be asked to accept an offer made by the council. At this stage, this is not a legally binding agreement. You will be provided with our current schedule of fees and charges for administering Deferred Payment Agreements, as well as advising you of the current interest rate.
You will however be providing consent for the council to seek a professional valuation of your security, and thereafter, provide you with a second illustration based on the valuation that has been undertaken. If you wish to proceed at this time, you will be asked to provide a certificate of insurance for the security. A legal agreement between you and the council will be drawn up, and you will be asked to sign in the presence of a solicitor.
You can receive funding support in 2 ways:
- 1) The council will support your placement in a care home under contract with the care home. The council will be meeting your needs. The council will pay the full cost of your care (less any funding from the NHS) directly to your care home on an agreed basis with them. You will receive an invoice every month, in arrears, from the council, in 2 parts:
- a) Income Contribution - this is the amount you have been assessed to be able to pay from your income towards the cost of your care
- b) Deferred Payment - this is the amount that is being ‘deferred’ against the security you have provided. This part is not payable until such time as your care ends, you terminate the agreement having repaid the sum due, the council terminates the agreement due to a breach of the terms and conditions or you no longer meet the eligibility criteria or following your death
- 2) The council pay the ‘deferred’ amount to you only. You can then combine this with a contribution from your income, which you pay directly to the care home. In this case, as the council has no contractual agreement with the care home, it is not meeting your needs. The only involvement by Social Services will be to check that you meet the eligibility criteria to be offered a Deferred Payment
Maximum borrowing
The maximum amount you can borrow is calculated as:
- asset value
- minus 10%
- plus existing capital
- minus £14,250
- = Maximum amount of borrowing
This is known as the Upper Limit of the Deferred Payment Agreement.
How long you can defer the charges for (known as ‘sustainability’) depends on whether your care costs can be covered for a minimum of 32 months (139 weeks).
If you are intending to use other assets to fund top-up arrangements or care more than what a Local Authority Budget would cover, the equity must be sustainable to cover this cost.
Interest payable
Interest is payable from the commencement of any borrowing. This may be before the regulated agreement has been fully signed, but you agree to use your security and you have care and support liabilities that need to be met.
Interest is calculated on a compound (daily) basis.
The maximum interest rate is set within regulation, being the 15 year market gilt rate, published by the Office for Budget Responsibility (OBR) every 6 months, in line with the spring and autumn economic statements.
The council are permitted to charge an additional 0.15% above this. Rates therefore are reviewed every 1 January and 1 July.
Fees and charges
You will be provided with our correct Schedule of Fees, Charges, Allowances and Rates at the time of your inquiry. When administering Deferred Payments, we make the following charges.
Set-up
Legal costs which include document preparation and liaison with client's solicitor, Deferred Payment set-up, and professional valuation. We reserve the right to seek additional disbursements where legal matters are complex. If this is the case, we will inform you in writing before proceeding. Valuation costs will be those incurred by the council.
Ongoing
The council will charge you for raising its invoice every month, for the ongoing monitoring of the account including the application of interest and issuing the half yearly statement of account. Revaluation fees will be charged to you at the actual cost incurred by the council.
Ending the Account
The council will charge for preparing the final accounts, and legal costs incurred.
You can choose to add interest, fees, and charges to the deferred amount, or pay for these services as and when you receive invoices for them.
Information and advice
The council provides access to finance opportunities using other assets as security under licence with the Financial Conduct Authority.
As a responsible lender, we encourage that you seek independent financial advice to ensure that this product meets your needs. We are unable to recommend this or alternative products, so independent advice will help you to make informed decisions.
It is your decision whether you accept or decline the offer of a deferred payment. You have several other options that you wish to consider such as:
- a family member pays the costs you cannot afford above your weekly income
- you have a pre-purchased insurance product or care needs annuity that provides a weekly income towards your care costs
- you may get a better finance offer from another lender or financial institution
We will provide you with all the relevant information you require about the council's product. The regulated product can only be offered where specific criteria are met and when we are approached to consider other security.
When borrowing commences, you will have access to our dedicated team that administer Deferred Payments, on telephone: 01904 555115.
Reduced capacity to make decisions
Where a resident lacks capacity to make decisions about entering into a Deferred Payment Agreement, the council has a duty under the Care Act 2014 to support attorneys, deputies or anyone willing to undertake this role, and to ensure decisions are made in the resident’s best interest.
Capacity is usually determined at the outset by a social worker. Where an attorney or deputy is in place, they are bound to act in the residents’ best interests.
Where a person wishes to apply to become a Deputy, the council will support them through the process.
Using a person’s chattels as security would be permitted under a standard Court Order, following which the legal agreement can be signed.
We would recommend that attorney’s or deputies seek independent financial advice to ensure that entering into an agreement is in the resident's best interest.
Support and monitoring
When you agree to a Deferred Payment Agreement, we will monitor your agreement and contact you in the event of the following:
- we need sight of your current insurance policy and schedule
- the interest rate is changing
- half-yearly statement
- you contact us for a settlement figure
- we are aware of a breach of the eligibility criteria
- 50% of the available equity has been used; the asset needs to be revalued
- 70% of the available equity has been used; The case is referral to Adult Social Care for needs and financial assessments to commence to ensure a smooth transition to a funded service
Breach of Deferred Payment Agreement
The council will provide written notice to end a Deferred Payment Agreement where the eligibility criteria can no longer be met, for example, you have capital more than the Higher Capital Limit, or the asset is no longer insured.
You will be asked to provide details of repayment of the debt within 90 days.
The council reserves the right to charge interest.
Termination of Deferred Payment Agreement
You may terminate the deferred payment agreement at any time prior to the specified time by giving the authority reasonable notice in writing and paying to the local authority the deferred amount and any interest and administration costs which have been treated in the same way as the deferred amount.
We will inform you upon request of the total amount outstanding to repay your Deferred Payment Agreement.
Repayment could be from the sale of the asset or from the asset being used to secure another loan that repays us. You can pay the loan back at any time and from another source if you want to.
Also see
- Assessing your needs
- Choosing your care and support (including Direct Payments)
- Paying for independent living with 24-hour support
Adult Social Care Community Team
Telephone: 01904 555111, Textphone: 07534 437804