1. Introduction

Financial information and advice enables people to make well informed choices about how they pay for their care and support, both now and in the future. Providing good quality, impartial financial information and advice helps people to have a better idea of how their resources can be used to fund different types of care and support services.

This chapter should be read alongside Information and Advice, in particular the sections on accessibility and proportionality.

The term ‘independent financial information and advice’ refers to services which are independent of the local authority.

The term ‘regulated’ financial advice means advice from an organisation regulated by the Financial Conduct Authority (FCA). Organisations which are regulated can provide individual recommendations about specific financial products.

2. Providing Financial Advice and Information

The local authority must provide financial information and advice related to care and support. Where it is not appropriate for the local authority to provide this information directly, it must ensure people can easily access independent financial advice from other sources.

It is important to identify those (including families and carers) who could benefit from financial advice or information as early as possible. Work to raise awareness generally about how care and support is funded is also important.

Local authorities should:

• consider a person’s need for financial information and advice when they make first contact with the authority and then throughout the assessment, care and support planning and review processes (see Assessment and Care and Support Planning chapters);
• work with partners to get the right messages to people in the local area, including adults with care and support needs, their carers, families and friends;
• work with partners to ensure they also communicate messages about the benefits of financial information and advice. This includes by services provided by the voluntary sector, hospitals, GPs, and solicitors who may be advising on wills or power of attorney.

When making plans about how to pay for care and support, the adult needs to have confidence about their options now, in the future and should their circumstances change. Adults will need to access financial information and advice at different times to enable them to make plans to pay for their care.

The local authority service should therefore cover immediate and long term financial planning, and provide access to the full range of financial information and advice – from basic budgeting tips to regulated advice. It is also importance that the staff providing financial information and recognise that some people are less able to protect themselves from theft, fraud and financial exploitation (see Adult Safeguarding).

The following aspects of financial information and advice should be available:

• understanding care charges;
• ways to pay;
• money management;
• making informed financial decisions;
• facilitating access to independent financial information and advice.

Before providing financial information or advice to an adult, the local authority should establish if they have a deputy from the Court of Protection or a person with Lasting Power of Attorney acting on their behalf.

3. Understanding Care Charges

People should be provided with information to help them understand what they may have to pay for their care and support, when they will need to pay and how it relates to their individual circumstances. This should cover:

• the charging framework for care and support
• how contributions are calculated (from both assets and income) and the means tested support available;
• top-ups (see Charging and Financial Assessment);
• how care and support choices may affect costs.

In the case of top-ups, the local authority should make sure that someone is willing and able to pay them on behalf of the adult; financial information will be vital in helping with this.

4. Ways to Pay

People must be provided with information on the availability of different ways to pay for care including through;

• income and assets (for example, pension or housing wealth);
• a deferred payment agreement (see Deferred Payment Agreements);
• financial products (for investing, borrowing or saving money – see the Moneyhelper  website for examples); or
• a combination of these things.

Information provided should be relevant to the person’s individual circumstances and ensure access to an independent source of information or advice is provided where required. This will be particularly important for adults who are meeting the total cost of care and support themselves, or who may be considering taking out a deferred payment agreement or purchasing a financial product.

5. Money Management

Adults will need different levels of support managing their finances depending on their situation, their care and support needs (including mental capacity) and the amount they are expected to contribute.

Some people may only need basic information and support, to help them manage their finances in light of their changing circumstances. Topics may include welfare benefits, advice on good money management, help with basic budgeting and possibly on debt management. The local authority may be able to provide some of this information itself, for example on welfare benefits, but where it cannot, it should help people access it.

Other people may need more complex information and advice, if they have a number of different financial arrangements for example.

6. Making Informed Financial Decisions

The local authority must support people to make informed, affordable and sustainable financial decisions about their care at all stages of their life.

In many situations the role of the local authority will be to understand the person’s circumstances, explore their preferences and help them to access the information and advice that they need to make well informed decisions.

Where a person lacks mental capacity, the authority must establish whether they have a deputy of the Court of Protection or a person with Lasting Power of Attorney acting on their behalf. If they do not, the local authority’s client affairs team may need to be involved.

The local authority must consider a person’s specific circumstances when providing information about the different methods of paying for care and support that may be available to them.

Staff within the local authority and other frontline services should be able to direct people to the financial information and advice they need, and be able to explain the differences and potential benefits from seeking non-regulated or regulated financial advice.

7. Facilitating Access to Independent Financial Information and Advice

The local authority also has a key in role in helping people access independent financial information and advice. This should include both generic free and fee-based advice, as well as services providing regulated forms of financial advice. The local authority should make sure people are clear which independent services may charge for the information and advice they provide. It should also be able to describe the general benefits of independent information and advice and explain the reasons why it may be beneficial for a person to take independent financial advice based on what is known of an person’s individual’s circumstances.

Where a person may be considering taking regulated financial advice, the local authority does not have to make a direct referral to one individual independent financial adviser, but should direct people to a choice of advisers regulated by the Financial Conduct Authority.

8. Further Reading

8.1 Relevant chapters

Preventing, Reducing and Delaying Needs for Care and Support

Information and Advice

Charging and Financial Assessment

8.2 Relevant information

Chapter 3, Information and Advice, Care and Support Statutory Guidance (Department of Health and Social Care)

Financial Resources for People with Disabilities (Credit Action)

1. What are Deferred Payment Agreements?

The establishment of the universal deferred payment scheme will mean that people should not be forced to sell their home in their lifetime to pay for their care. By entering into a deferred payment agreement (DPA),  a local authority agrees to:

• defer the payment of charges due to it from the adult, for the costs of meeting needs in a care home or supported living accommodation; or
• defer the repayment of a loan to the adult in instalments, to cover the costs of care and support in a care home or supported living accommodation.

The Care Act 2014 sets out where the amount of the DPA, or part of the sum, owed to the local authority does not need to be repaid until a specified time.

The Regulations specify when a local authority may or must offer a person a deferred payment or a loan.

Deferring payment can help people to delay the need to sell their home, and provides peace of mind during a time that can be challenging (or even a crisis point) for them and their loved ones as they make the transition into care.

“Deferred payment is fundamentally about having a mechanism that avoids the family facing the trauma of a fire sale of the property at the moment of crisis. Having a deferred payment gives that piece of mind of knowing that is not something they have to address at that point. It also ensures that the property is not sold at a point when everything else is going on, potentially at a lower price than it would achieve if properly marketed over time. It is an important protection of the asset, but much more important protection of the emotional crisis that a family is in at the point at which this takes place. That is the best way to understand what a deferred payment should be about.” (Paul Burstow, Hansard 2014)

A deferred payment agreement can provide additional flexibility for when and how someone pays for their care and support. It should be stressed from the outset that the payment for care and support is deferred and not ‘written off’ – the costs of provision of care and support will have to be repaid by the individual (or a third party on their behalf) at a later date.

The scheme is universally available throughout England, and local authorities are required to offer deferred payment agreements to people who meet certain criteria governing eligibility for the scheme (see Section 2, Qualifying Criteria for Deferred Payment Agreements). Local authorities need to ensure that adequate security is in place for the amount being deferred, so that they can be confident that the amount deferred will be repaid in the future. Local authorities are also encouraged to offer the scheme more widely to anyone they feel would benefit who does not fully meet the criteria. The amended Regulations give the local authority greater flexibility to do this.

A deferral can last until death, however many people 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. This is entirely up to the individual to decide. Further details on deferred payment agreements are set out in the sections below.

2. Qualifying Criteria for Deferred Payment Agreements

Deferred payment agreements are designed to prevent people from being forced to sell their home in their lifetime to meet the cost of their care. Local authorities must offer them to people who meet the criteria below and who are able to provide adequate security (see Section 13, Obtaining Security). Subject to these criteria they must offer them to people who have their needs met by the local authority, and also people who meet their own needs. The regulations provide that someone must be offered a deferred payment agreement if they meet all of the following criteria at the point of applying for a deferred payment agreement. Broadly, they are that the:

1. person is ordinarily resident in the local authority area or present in the area but of no settled residence; or ordinarily resident in another local authority area but the local authority has determined that they will or would meet the individual’s care needs under section 19 of the Care Act if asked to do so [see note 1];
2. person has needs which are to be met by the provision of care in a care home. This is determined when someone is assessed as having care and support needs [see note 2] which the local authority decides should be met through a care home placement;
3. person has less than (or equal to) £23,250 in assets excluding the value of their main or only home (that is in savings and other non-housing assets and housing assets other than their main or only home);
4. person’s home is not disregarded [see note 3], for example it is not occupied by a spouse or dependent relative as defined in regulations on charging for care and support (that is someone whose home is taken into account in the local authority financial assessment and so might need to be sold).
5. the person agrees to the agreement.

Note 1: Where a local authority is meeting an individual’s care and support needs under section 19(2) of the Care Act.

Note 2: When someone is arranging their own care and support and the authority has not performed an assessment, this condition is satisfied when someone would be assessed as having eligible needs were the authority to have carried out such an assessment.

Note 3: Disregarded for the purposes of the financial assessment carried out under section 17 of the Act.

As well as providing protection for people facing the prospect of having to sell their home to pay for care, deferred payment agreements can offer valuable flexibility, giving people greater choice over how they pay their care costs. Local authorities are, at their discretion, permitted to be more generous than these criteria and offer deferred payment agreements to people who do not meet the above criteria.

In deciding whether someone who does not meet all of the criteria above should still be offered a deferred payment, some considerations a local authority may wish to take into account include (but are not limited to):

• whether meeting care costs would leave someone with very few accessible assets (this might include assets which cannot quickly / easily be liquidated or converted to cash);
• if someone would like to use wealth tied up in their home to fund more than just their core care costs and purchase affordable top ups (see Section 8, How much can be Deferred?);
• whether someone has any other accessible means to help them meet the cost of their care and support; and/or
• if a person is narrowly not entitled to a deferred payment agreement given the criteria above, for example because they have slightly more than the £23,250 asset threshold. This should include people who are likely to meet the criteria in the near future.

Local authorities may also at their discretion enter into deferred payment agreements with people whose care and support is provided in supported living accommodation.

The local authority should not exercise this discretion unless the person intends to retain their former home and pay the associated care and accommodation rental costs from their deferred payment. Further details on precisely what qualifies as supported living accommodation are set out in the regulations.

Deferred payment agreements cannot be entered into in order to finance mortgage payments on supported living accommodation.

In short, a local authority may enter into a deferred payment if:

• the adult’s needs for care and support are being met by providing accommodation in a care home or in supported living accommodation, or if the local authority had been asked to meet that person’s needs it would have provided for either of those types of accommodation;
• the local authority has obtained adequate security for the payment of the deferred amount;
• the adult agrees to the agreement.

3. Types of Deferred Payment Agreements

Deferred payment agreements can take two forms:

• the local authority pays the care home or supported living accommodation directly and defers the charges due to it from the individual (traditional type);
• the individual pays the care provider for their care and the local authority loans them the cost of care in instalments less any contributions the individual contributes from other sources (loan type).

When considering their approach as to when or whether to offer loan or traditional type deferred payment agreements, local authorities should have regard to their duties under the Care Act, including their duties under the wellbeing principle and their market duties. Local authorities cannot refuse to enter into a loan type deferred payment agreement if the qualifying criteria are met and the individual requests it, as set out in the DPA Regulations 2014 (subject to Section 4, Permission to Refuse a Deferred Payment Agreement below).

The local authority must comply with all relevant legislation and act under the guidance.

In all cases, a local authority is only required to enter into a deferred payment agreement to cover the costs of care and support which it considers necessary.

4. Permission to Refuse a Deferred Payment Agreement

A local authority must offer a deferred payment to someone meeting the criteria governing eligibility for deferred payment agreements (DPAs) and who is able to provide adequate security for the debt (obtaining a land registry charge on their property, see Section 13, Obtaining Security), and may offer a deferred payment agreement to others who do not meet the criteria, at their discretion.

However there are certain circumstances in which a local authority may refuse a request for a deferred payment agreement (‘permission to refuse’), even if a person meets the eligibility criteria and the local authority would otherwise be required to offer the person an agreement. This permission (or discretion) to refuse is intended to provide local authorities with a reasonable safeguard against default or non-repayment of debt.

A local authority may refuse a deferred payment agreement despite someone meeting the eligibility criteria where:

1. a local authority is unable to secure a first charge on the person’s property;
2. where someone is seeking a top up [see note 4];
3. where a person does not agree to the terms and conditions of the agreement, for example a requirement to insure and maintain the property.

Note 4: In these situations, a local authority should still seek to offer a deferred payment agreement but should be guided by principles in the section below (see Section 8, How much can be deferred?) to determine a maximum amount that is sustainable (or reflects their core care costs without any top-ups) and agree a deferral. The person can then choose whether they wish to agree.

In any of the above circumstances, a local authority should consider whether to exercise its discretion to offer a deferred payment anyway (for example, if a person’s property is uninsurable but has a high land value, the local authority may choose to accept charges against this land as security instead).

The main reason in practice for a local authority refusing to defer care home charges is when the amount of the care charges deferred has already reached the equity limit. In such circumstances, the local authority will stop deferring further care home charges. Interest and administration charges may continue to accumulate (see Section 14, Interest Rate and Administration Charge).

5. Circumstances in which Local Authorities may stop Deferring Care Costs

There are also circumstances where a local authority may refuse to defer any more charges for a person who has an active deferred payment agreement. Local authorities cannot demand repayment in these circumstances, and repayment is still subject to the usual terms of termination, see Section 16, Termination of the Agreement.

The local authority should provide a minimum of 30 days’ advance notice that further deferrals will cease; and should provide the person with an indication of how their care costs will need to be met in future. Depending on their circumstances, the person may either receive local authority support in meeting the costs of their care, or may be required to meet their costs from their own income and assets. Local authorities exercising these powers to cease deferring additional amounts should consider their decision to do so whilst considering the person’s circumstances and their overarching duties under the wellbeing principle (see Promoting Wellbeing chapter).

Circumstances in which a local authority may refuse to defer any more charges include:

1. when a person’s total assets fall below the level of the means test (see Charging and Financial Assessment chapter) and the person becomes eligible for local authority support in paying for their care;
2. where a person no longer has need for care in a care home (or where appropriate supported living accommodation);
3. if a person breaches certain predefined terms of their contract (which must be clearly set out in the contract) and the local authority’s attempts to resolve the breach are unsuccessful and the contract has specified that the authority will stop making further payments in such a case; or
4. if, under the charging regulations (see Charging and Financial Assessment chapter), the property becomes disregarded for any reason and the person consequently qualifies for local authority support in paying for their care, including but not limited to:
   • where a spouse or dependent relative (as defined in charging regulations) has moved into the property after the agreement has been made, where this means the person is eligible for local authority support in paying for care and no longer requires a deferred payment agreement;
   • where a relative who was living in the property at the time of the agreement subsequently becomes a dependent relative. The local authority may cease further deferrals at this point.

Local authorities should not exercise these discretionary powers if a person would, as a result, be unable to pay any tariff income due to the local authority from their non-housing assets.

Local authorities must also cease deferring further amounts when a person has reached the ‘equity limit’ that they are allowed to defer (see Section 6, How much can be Deferred?), or when a person is no longer receiving care and support in either a care home setting or in supported living accommodation. This also applies when the value of the security has dropped and so the equity limit has been reached earlier than expected.

See Case Study: Deferred Payments Arrangements.

6. Information and Advice

See also Information and Advice chapter.

Under the Care Act 2014, local authorities have responsibilities to provide information and advice about peoples’ care and support, including  deferred payment schemes.

In order to be able to make well-informed choices, it is essential that people access appropriate information and advice before taking out a deferred payment agreement (DPA). It is also important that people are kept informed about their DPA throughout the course of the agreement. See also Financial Information and Advice chapter; Section 14, The Local Authority’ Responsibilities whilst the Agreement is in place and Section 16, Termination of the Agreement).

Deferred payment agreements are often made during a time that is demanding for a person and their loved ones – a period when they are moving into a care home. People may need additional support during this period, and the local authority has a role in providing this support, particularly if a move into care is made rapidly and / or at an unexpected point. The local authority must provide information in a way which is clear and easy to understand, and it should be designed to ease the move into a care home for people, their carers and their families.

Carers and families often help people to make decisions about their care and how they pay for it. Local authorities should as appropriate invite carers and/or families to participate in discussions, and should also provide them with all the information that would otherwise be given to the person they care for, subject (where required) to the consent of the person with care and support needs (if they have capacity) or someone else with appropriate authorisation. In doing this, they must ensure compliance within the principles of the Mental Capacity Act 2015 and data protection legislation, and duties pertaining to information and advice (see Information and Advice and also Section 5, Capacity Issues).

If a local authority identifies someone who may benefit from or be eligible for a DPA or a person approaches them for information, the local authority must tell them about the DPA scheme and how it works. This explanation should, at a minimum:

• set out clearly that the fees are being deferred or delayed and must still be paid back at a later date, for example through the sale of the home (potentially after the individual’s death);
• explain the types of security that a local authority is prepared to accept (as set out by each local authority in a publicly – available policy; see Section 11, Obtaining Security);
• explain that if a home is used as security, the home may need to be sold at a later date to repay the amount due;
• explain that the total amount they can defer will be governed by an equity limit (discussed in Section 6, How much can be Deferred?) which may change if the value of their security changes;
• explain the circumstances where the local authority may cease to defer further amounts (such as when the person qualifies for local authority support in paying for their care), and the circumstances where the local authority has to stop deferring further amounts (such as when the person reaches their equity limit);
• explain how interest will be charged on any amount deferred;
• explain that they may be liable to pay administrative charges;
• explain what happens on termination of the agreement, how the loan becomes due and their options for repayment;
• explain what happens if they do not repay the amount due;
• set out the qualifying criteria for a DPA;
• detail the requirements that must be adhered to during the course of the DPA;
• explain the implications that a deferred payment agreement may have on their income, their benefit entitlements, and charging;
• provide an overview of some potential advantages and disadvantages of taking out a DPA, and explain that there are other options for paying for their care that they may wish to consider;
• note the existence of the 12 week disregard, which will afford those who qualify for it some additional time to consider their options in paying for care; and
• suggest that people may want to consider taking independent financial advice (including flagging the existence of regulated financial advice), in line with the Care and Support Statutory Guidance (see Charging and Financial Assessment chapter).

Local authorities should provide easy to read information about how the scheme works. This may be in the form of a standardised information sheet.

Local authorities must provide this information and advice in formats that ensure compliance with the requirements of the Equality Act 2010 (in particular, they must ensure where appropriate that the information is accessible to the sensory impaired, people with learning disabilities, and people for whom English is not their first language) (see Information and Advice).

Where relevant, local authorities should provide information and advice on DPAs at the earliest appropriate opportunity during the period of the 12 week disregard and  should aim to ensure that people are able to make a smooth transition from the 12 week disregard to the DPA if they opt to enter into an agreement. This means ensuring as far as possible that a DPA is available by the first day of week 13.

Local authorities should advise people (where appropriate) that they will need to consider how they plan to use, maintain and insure their property if they take out a DPA; that is whether they wish to rent, to prepare for sale, or to leave it vacant for a period. The local authority should also advise if it intends to place conditions on how the property is maintained whilst the DPA is in place (authorities will usually include requirements for people to maintain and insure their homes in the terms and conditions of a deferred payment agreement; see Section 15, Making the Agreement).

Basic information and advice should be available for homeowners on how they may choose to use their property when they enter care, for example information on how they may go about renting their property, and the potential impact on other people living in the property if a sale is required after their death.

People should be directed to more specialist organisations if needed, who can provide further advice on this issue, including information about their legal responsibilities as landlords and their obligations to any potential tenants.

See also Deferred Payment Case Studies

7. Mental Capacity

See also Mental Capacity.

As a deferred payment agreement can take some time to set up and agree, it is important that both the local authority and the individual consider any potential issues around mental capacity.

Where a person may lack capacity to request a deferred payment, a deputy or attorney (a person with a relevant enduring power of attorney or lasting power of attorney – LPA) may request a deferred payment on their behalf. If a family member requests a deferred payment and they do not have the legal power to act on behalf of the person, the person and the family member should receive information and advice on how to obtain this, through LPA and deputyships.

Where the local authority is the deputy for a person, the local authority deputy may apply for deferred payments where this is in the best interests of the person. Local authorities must not enter into deferred payment agreements with a person lacking mental capacity unless the proper arrangements are in place.

Local authorities and the person applying for a deferred payment (who has capacity) may also want to consider any potential issues around loss of capacity. Information and advice should be provided on options for deputyship, LPA and advocacy (see Independent Advocacy and Independent Mental Capacity Advocate Service). The local authority should confirm what would happen were the person to lose capacity and not have made their own arrangements. For further advice on capacity and financial arrangements see Annex D: Recovery of Debts a deferred payment being effectively a consensually accruing debt to the local authority.

In short, if a person lacks capacity to request a deferred payment, the Care and Support Statutory Guidance advises that a deputy appointed by the Court of  Protection or an attorney appointed by an enduring or lasting power of attorney may be requested  to enter into a deferred payment agreement on the adult’s behalf. Local authorities should in appropriate circumstances provide information about deputyship, legal powers of attorney and advocacy and confirm what would happen if an adult were to lose capacity and had not made his or her own arrangements.

8. How much can be Deferred?

In principle, a person should be able to defer the entirety of their care costs; subject to any contribution the local authority is allowed to require from the person’s income. The local authority will need to consider whether a person can provide adequate security for the deferred payment agreement (see Section 13, Obtaining Security; usually this requirement for ‘adequate security’ will be fulfilled by securing their deferred payment agreement against their property).

If the person is considering a top up, the local authority should also consider whether the amount or size of the deferral requested is sustainable given the equity available from their chosen form of security. A discussion of sustainability may be helpful in all cases to ensure the person is aware of how much care their chosen form of security would afford them.

Three factors will dictate how much a person will defer, each of which is discussed below:

1. The amount of equity a person has available in their chosen form of security (usually their property);
2. The amount a person is contributing to their care costs from other sources, including income and (where they choose to) any contribution from savings, a financial product or a third party;
3. The total care costs a person will face, including any top ups the person might be seeking.

The local authority should also be satisfied that any top up they agree to is sufficiently sustainable. Some guidance for local authorities in assessing whether a top up is sustainable is provided below.

9. Equity Limit

When considering the equity available, the local authority must be guided by an ‘equity limit’ for the total amount that can be deferred and ensure that the amount deferred does not rise above this limit. The equity limit will leave some equity remaining in the security used for the DPA. This will both act as a buffer to cover any subsequent interest which continues to accrue, and will provide a small ‘cushion’ in case of small variations in value of the security.

In the majority of cases a property will be used as security, so the equity limit will provide a cushion against changes in house prices. When calculating progress towards the equity limit, the local authority must also include any interest or fees to be deferred.

If the person intends to secure their deferred payment agreement with a property, the local authority must obtain a valuation of the property. Reasonable property valuation costs are included in the list of administration charges that the local authority can pass on to people, should it  wish to do so. People may request an independent assessment of the property’s value (in addition to the local authority’s valuation). If an independent assessment finds a substantially differing value to the local authority’s valuation, the local authority and person should discuss and agree an appropriate valuation prior to proceeding with the agreement.

Where a property is used as security to offer a deferred payment agreement, the equity limit must be set at the value of the property minus ten percent, minus £14,250 and the amount of encumbrance secured on it. This limit provides some protection to local authorities against changes in the value of the security (such as possible house price fluctuations) and the risk that they may not be able to recoup the full amount owed, but also should mean that people qualify for local authority support if they deplete the equity available in their property (and are consequently not at risk of having to sell their home to pay for care).

The local authority should, when someone is approaching or reaches the point at which they have deferred 70% of the value of their chosen security, review the cost of their care with the person, discuss when the person might be eligible for any means tested support, discuss the implications for any top up they might currently have, and consider jointly whether a deferred payment agreement continues to be the best way for someone to meet these costs.

In summary, the Care and Support Statutory Guidance sets out how the equity limit should be calculated. The local authority should obtain a valuation of the adult’s property from which it must deduct an allowance of ten percent of the value of the property with a further deduction of the lower capital limit (£14,250.00) and also the amount of any charge secured upon the property. The equity limit provides a protection for local authorities and the adult by making certain that there is a buffer or cushion to protect the parties against a change in circumstances, that is price fluctuations. So those persons who reach the equity limit are still able to receive local authority funded care without the need to sell the house.

Upon or shortly before the amount of the care costs paid by the local authority amounts to or exceeds seventy percent of the equity limit , the local authority should review the deferred payment agreement with the adult to establish whether the deferred payment agreement remains appropriate.

See Case Study: Deferred Payments Arrangements.

Local authorities must not allow additional amounts to be deferred beyond the equity limit, and must refuse to defer care costs beyond this (see Section 2, Permission to Refuse a Deferred Payment Agreement). However, interest can still accrue beyond this point, and administrative charges can still be deferred.

10. Contributing to Care Costs from other Sources

A person may meet the costs of their care and support from a combination of any of four primary sources:

1. income, including pension income;
2. savings or other assets they might have access to, this might include any contributions from a third party;
3. a financial product designed to pay for long-term care; or
4. a deferred payment agreement which enables them to pay for their care at a later date out of assets (usually their home).

The share of care costs that someone defers will depend on the amount they will be paying from the other sources listed above.

The local authority may require a contribution towards care costs from a person’s income, but the person has a right to retain a proportion of their income (the ‘disposable income allowance’). The disposable income allowance is a fixed amount (up to £144 per week) of a person’s income which the local authority must allow the person to retain (if the person wants to retain it). The local authority can require the person to contribute the rest of their income, but must allow the person to retain as much of their disposable income allowance as they want to.

A person may choose to keep less of their income than the disposable income allowance. This might be an advantage to the person as they would be contributing more to the costs of their care from their income, and consequently reducing the amount they are deferring (and accruing less debt to their local authority overall). However this must be entirely at the individual’s decision and the local authority must not compel someone to retain less than the disposable income allowance if the person wants to retain the full amount.

If a person decides to rent out their property during the course of their DPA, the local authority should permit that person to retain a percentage of any rental income they possess. The local authority may want to consider whether to offer other incentives to individuals to encourage rental of properties, though the decision as to whether or not to rent a property must be the person’s and theirs alone.

A person may also contribute to their care costs from payments by a third party (including any contributions available from a financial product) or from their savings. Contributing to care costs from another source would be beneficial for a person as it would reduce the amount they are deferring (and hence reduce their overall debt to the local authority). The local authority must not compel a person to contribute to their deferral from these sources.

In brief, the local authority may require an adult to pay a contribution from their ongoing income towards the cost of care home fees. The person must be allowed to keep a weekly sum known as the disposable income allowance (DIA) with a maximum amount of £144.00 per week. The person may decide not to keep all of the DIA or the person may make payments from other sources, for example savings. The result of such payments would mean the person’s care costs would be less and the amount ultimately repayable to the local authority under the deferred payment agreement would be reduced.

See Case Study: Deferred Payments Arrangements.

11. Care Costs

Before considering in detail how much they will be deferring, a person and usually the local authority should have a rough idea of their likely care costs as a result of the care planning process. Someone may wish to vary their care package (or any top ups they may be considering) following consideration of what they could afford with a deferred payment agreement, but should approach the process with an approximate idea of what their care costs are likely to be.

11.1 Top ups

In principle, people should be able to defer their full care costs including any top ups. At a minimum, when local authorities are required to offer a deferred payment agreement they must allow someone to defer their ‘core’ care costs. To ensure sustainability of the deferral, the local authority has discretion over the amount people are permitted to top up. It should consider any request for top ups, but retain discretion over whether or not to agree to a given top up and should accept any top up deemed to be reasonable given considerations of affordability, sustainability and available equity. The local authority should be mindful of the duties set out in relation to top ups and additional costs in the Care and Support and Aftercare (Choice of Accommodation) Regulations 2014.

In essence, the local authority retains a discretion as to whether it agrees to a top up on the basis of affordability, sustainability and available equity.

12. Sustainability

When deciding on the amount to be deferred in a discretionary deferred payment agreement (particularly when considering top ups), both parties should consider a range of factors to satisfy themselves that the arrangement is sustainable including:

• the likely period the person would want a DPA for (if they intend to use it as a ‘bridging loan’);
• the equity available;
• the sustainability of a person’s contributions from their savings (if they are making one);
• the flexibility to meet future care needs; and
• the period of time a person would be able to defer their care costs for.

Deferred payment agreements should prevent people from having to sell their home in their lifetime to pay for their care. The local authority should discuss with the person the projected limit of what their equity could cover, given their projected care costs, and how their care costs might change over time.

This may include a discussion of when they are likely to reach any of the income thresholds and may begin to qualify for local authority support in paying for their care.

If the person is requesting a top up, it is important that the local authority discusses what might happen to any top up requested if the person reaches the equity limit and moves on to local authority support in paying for their care, and ensures that a written agreement is in place (see Annex A: Choice of Accommodation and Additional Payments). In particular, the local authority should make the person aware that once they have reached the equity limit, the local authority may not be willing to fund their top up, and the person may need to find other ways to pay for it or be prepared for a change in their care package.

The local authority should also consider with the person the length of time that their intended contribution to care costs from savings would last, if they intend to contribute to their care costs from their savings. This should include consideration of the impact on care if the person’s savings are depleted (normally this would involve increasing the amount the person is deferring).

An important factor in the sustainability of a deferred payment agreement will be any future care and support needs someone might face. The local authority and the person concerned should consider allowing flexibility for changes in circumstance, including possible escalations of needs, when deciding how much someone should defer. The local authority and the person concerned  should factor any potential changes in circumstances into their considerations of sustainability.

When agreement has been reached between a person and the local authority as to how much they want to defer, the local authority must ensure this is clearly and unambiguously set out in the deferred payment agreement. See also Section 15, Making the Agreement.

The amount being deferred should be reviewed on a regular basis to ensure the deferred amount does not exceed the equity limit. The local authority should have particular regard to the amount deferred as it approaches the equity limit.

While the full costs of a person’s care may be deferred under an approved agreement, the amount to be deferred depends not only the equity limit but also on other factors such as the amount the person must pay weekly towards their care, the payment of top ups as well as the total amount of care costs which a person may need to fund. The local authority must be convinced of the sustainability of the arrangement and the deferred payment sum is safely secured against the deferred payment agreement.

Further details of local authorities’ responsibilities during the course of the DPA are set out below.

See Case Study: Deferred Payments Arrangements.

13. Obtaining Security

The  local authority must have adequate security in place when entering into a deferred payment agreement. The regulations set out one form of security that the local authority must accept, and also provide wider discretion for other forms of security to be accepted as they see fit. The local authority should consider whether another type of security could be provided if a person cannot secure their deferred payment agreement with a charge on a property.

One form of ‘adequate security’ would be the local authority securing a first legal mortgage charge against a property on the Land Register. The local authority must accept a first legal mortgage charge as adequate security and must offer a deferred payment to someone who meets the eligibility criteria for the scheme where the local authority is able to secure a first legal mortgage charge on the property.

In cases where an agreement is to be secured with a jointly owned property, the local authority must seek both owners’ consent (and agreement) to a charge being placed on the property. Both owners will need to be signatories to the charge agreement, and the co-owner will need to agree not to object to the sale of the property for the purpose of repaying the debt due to the local authority (following the same procedure as in the case where an individual is the sole owner of a property).

The local authority must obtain similar consent to a charge being created against the property from any other person who has a beneficial interest in the property.

Under the discretionary scheme, the local authority has discretion to decide what else may constitute ‘adequate security’ for a deferred payment agreement, in cases where a first charge cannot be secured. The  local authority’s decision should be based on an explicit and publicly accessible policy of what other types of security they are willing to consider in addition to a first charge, but the local authority may consider the merits of each case individually. Other forms of security a local authority may choose to consider include (but are not limited to):

• a third party guarantor – subject to the guarantor having / offering an appropriate form of security;
• a solicitor’s undertaking letter;
• a valuable object such as a painting or other piece of art; or
• an agreement to repay the amount deferred from the proceeds of a life assurance policy.

The local authority has full discretion in individual cases to refuse a deferred payment agreement if it is not satisfied that adequate security is in place. The security should also be revalued when the amount deferred equals or exceeds 50% of the value of the security to assess any potential change in the value (and consequently the person’s ‘equity limit’ should be reassessed in turn). After this revaluation, the local authority should revalue the security periodically to monitor any potential further changes in value. If in either case there has been any substantial change the local authority should review the amount being deferred as well, see Section 8, How much can be Deferred).

In summary, the Care and Support Statutory Guidance outlines what would be adequate security for an authority to enter into a deferred payment agreement. In most instances, this takes the form of a legal charge over the property. When the main asset is the home, the local authority will seek to place a first legal charge on the property.

In the case of a jointly owned property or where the adult has a beneficial interest and may not be a legal owner, the local authority must obtain the owner’s consent to having a charge being placed on the property. The other owners will need to be signatories to the charge agreement and also not object to the sale of the property to repay the debt payable to the local authority.

The local authority is advised to revalue the security when the amount secured under the deferred payment agreement reaches fifty percent of the value of the security. At this juncture, the local authority may wish to review the adult’s equity limit and the amount which can be deferred under the agreement. It is good practice for the local authority to monitor and revalue the security periodically to ascertain whether there are any substantial changes in the value of the property which may impact on the amount of the equity limit and the amount of care costs which may be deferred under the agreement.

14. Interest Rate and Administration Charge

The deferred payment agreement scheme is intended to be run on a cost-neutral basis, with the local authority able to recoup the costs associated with deferring fees by charging interest. The local authority can also recoup the administrative costs associated with DPAs, including legal and ongoing running costs, via administration charges which can be passed on to the individual. Administration charges and interest can be added on to the total amount deferred as they are accrued, although a person may request to pay these separately if they choose. The agreement must make clear that all fees deferred, alongside any interest and administrative charges incurred, must be repaid by the person in full. The local authority must also notify the individual in writing whenever they are liable for an administration charge.

Local authorities will have the ability to charge interest on any amount deferred, including any administration charge deferred. This is to cover the cost of lending and the risks to local authorities associated with lending, for example the risk of default. Where local authorities charge interest this must not exceed the maximum amount specified in regulations. A local authority may (but is not required to) charge the nationally-set maximum interest rate. The same interest rate must be charged on all deferred payments within a local authority.

The national maximum interest rate changes every six months on the first of January and July respectively, to track the market gilts rate specified in the most recently published report by the Office of Budget Responsibility (OBR) plus a 0.15% default component (for example, gilt rate 1% plus 0.15% equals a maximum interest rate of 1.15%). The market gilt rate is currently published in the Economic and Fiscal Outlook, which is usually published twice yearly alongside the Budget and Autumn Statement on the OBR website.

The local authority will have the ability to charge interest on any amount deferred, including any administration charge deferred. This is to cover the cost of lending and the risks to the local authority associated with lending, for example the risk of default. Where the local authority charges interest this must not exceed the maximum amount specified in regulations. The  local authority may (but is not required to) charge the nationally-set maximum interest rate. The same interest rate must be charged on all deferred payments within a local authority.

The local authority must ensure that any changes to the national maximum interest rate are reflected within their authority and are applied to any agreements they have entered into (unless they are already charging less than the national maximum). Individual agreements must also contain adequate terms and conditions to ensure that the interest rate within any given agreement does not exceed the nationally-set maximum.

The local authority must inform people before they make the agreement if interest will be charged, what interest rates are currently set at and when interest rates are likely to change. This is to enable people to make well-informed decisions about whether a deferred payment agreement is the best way for them to meet the costs of their care.

The interest charged and added to the deferred amount will be compounded, and the local authority should ensure when making the agreement that individuals understand that interest will accrue on a compound basis.

Interest can accrue on the amount deferred even once someone has reached the ‘equity limit’ (see Section 6, How much can be Deferred). It can also accrue after someone has died up until the point at which the deferred amount is repaid to the local authority. If the local authority cannot recover the debt and seeks to pursue this through the County Court system (see Annex D: Recovery of Debts), the local authority may charge the higher County Court rate of interest.

The local authority must set their administration charge at a reasonable level, and this level must not be more than the actual costs incurred by the local authority in provision of the Universal Deferred Payment Scheme, as set out in regulations. Relevant costs may include (but are not limited to) the costs incurred by a local authority whilst:

• registering a legal charge with the Land Registry against the title of the property, including Land Registry search charges and any identity checks required;
• undertaking relevant postage, printing and telecommunications;
• costs of time spent by those providing the service;
• cost of valuation and re-valuation of the property;
• costs for removal of charges against property;
• overheads, including where appropriate (shares of) payroll, audit, management costs, legal service.

The local authority should maintain a publicly available list of administration charges that a person may be liable to pay. It is good practice to separate charges into a fixed set up fee for deferred payment agreements, reflective of the costs incurred by the local authority in setting up and securing a typical deferred payment agreement, and other reasonable one time fees during the course of the agreement (reflecting actual charges incurred in the course of the agreement).

15. Making the Agreement

Where someone chooses to enter into a deferred payment agreement, the local authority should aim to have the agreement finalised and in place by the end of the 12 week disregard period (where applicable) (see Annex B: Treatment of Capital), or within 12 weeks of the person approaching the local authority regarding DPAs in other circumstances.

Decisions on a person’s care and support package, the amount they intend to defer, the security they intend to use and the terms of the agreement should only be taken following discussion between the local authority and the individual. Once agreement in principle has been reached between the local authority and the person, it is the local authority’s responsibility to put  the details agreed into a deferred payment agreement, taking the legal form of a contract between the local authority and the person.

The local authority should provide a hard copy of the deferred payment agreement to the person, and they should be provided with reasonable time to read and consider the agreement, including time for the individual to query any clauses and discuss the agreement further with the local authority.

The agreement must clearly set out all terms, conditions and information necessary to enable the person to ascertain his or her rights and obligations under the agreement.

These include:

1. terms to explain how the interest will be calculated and that it will be compounded if it is to be added to the deferred amount;
2. information on administrative costs the individual might be liable for;
3. terms to explain how the adult may exercise his or her right to terminate the agreement, the process for and consequences of terminating the agreement and specify what notice should be given (see Section 16, Terminating the Agreement);
4. terms to explain the circumstances in which the local authority might refuse to defer further fees (either when it is required to stop deferring, for example if the person has already deferred up to their ‘equity limit’, or when it has powers to stop deferring, such as when a person qualifies for local authority support in paying for their care; as set out in Section 6, How much can be Deferred and Section 2, Permission to Refuse a Deferred Payment Agreement);
5. that the local authority will secure their debt either by placing a legal (Land Registry) charge against the property, or by some other means specified;
6. a term requiring the local authority to provide the person with a written statement every six months and within 28 days of request by the person, setting out how much the person owes to the authority and the cost to them of repaying the debt;
7. a term which explains that the maximum amount which may be deferred is the equity limit and that this is likely to vary over time;
8. a term which requires the local authority to give the adult 30 days written notice of the date on which they are likely to reach the equity limit;
9. a term which requires the adult to obtain the consent of the local authority for any person to occupy the property; and
10. an explanation that the local authority will stop deferring its charges and making advances under a loan agreement if the person no longer receives care and support in a care home or supported living accommodation or if the local authority no longer considers that the adult’s needs should be met in such accommodation.

If the agreement is not for the deferral of charges due to the authority (a ‘loan’-style agreement), the agreement must also contain:

1. a term to make clear that the authority will make advances of the loan to the adult in instalments;
2. a term to make clear that the purpose of the loan is to pay for costs of care and support in a care home or supported living accommodation. This should explain:
   1. the consequences of any failure by the adult to pay those costs of care and support; and
   2. that the adult must inform the local authority if he or she no longer receives or intends to receive care in such accommodation.

The agreement should also stipulate:

1. the value of any accrued or possible administrative charges, and where possible a breakdown of their calculation;
2. the means of redress if either party feels the other has broken the terms of the agreement;
3. the person’s responsibilities regarding maintenance and insurance of their home;
4. the person’s responsibility to notify the local authority of any change to their income, home or care and support;
5. the person’s responsibility to notify the local authority if they intend to rent or sell their property and if someone has gained or may gain a beneficial interest in their property;
6. the local authority’s responsibility to give the person 30 days written notice if it intends to cease to defer charges (or make loan instalments) under the agreement;
7. a clear explanation of the consequences of taking out a DPA for the person and their property, including anybody who may reside in the property;
8. the equity limit of their security (as discussed above in the section entitled ‘how much can be deferred’) and the scope for this to change upon revaluation of the security used for the DPA;
9. the process for varying any part of the agreement;
10. the process by which the local authority can require a re-valuation of a person’s chosen form of security.

The local authority should ensure at a minimum that people sign or clearly and verifiably affirm they have received adequate information on options for paying for their care, that they understand how the DPA works and understand the agreement they are entering into; and that they have had the opportunity to ask questions about the contract. A term reflecting this should be included in the agreement itself.

The local authority will need to consider whether the deferred payment agreements they enter into are regulated credit agreements to which the Consumer Credit Act 1974 (CCA) and Financial Services and Markets Act 2000 (FSMA) apply.

The scope of ‘regulated credit agreements’ is set out in article 60B of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (RAO). A credit agreement is regulated unless exempt, and there are a number of exemptions in articles 60C to 60H of the RAO. It is likely that most DPAs will fall within such an exemption. If the agreement is regulated, it will need to comply with all applicable requirements of the CCA. In addition, the local authority will need a relevant permission from the Financial Conduct Authority (FCA), and to comply with the FCA’s rules and principles, unless the exclusion in article 72G of the RAO applies (if the credit agreement is within the scope of the Consumer Credit Directive FCA authorisation is required).

All deferred payment agreements will be subject to the Unfair Terms in Consumer Contracts Regulations 1999, so the terms will have to be written in plain, intelligible English and will not be binding if they are unfair to the borrowers. Local authorities will also have to ensure that they do not contravene the Consumer Protection from Unfair Trading Regulations 2008.

Under Section 79 of the Care Act, the local authority may delegate responsibility for deferred payment agreements to another body. This could potentially allow a number of local authorities to combine their collective resources and offer a regional solution tailored to the local conditions and the administrative burden they face. If the  local authority chooses to exercise their powers for delegation, the local authority must satisfy itself that the body taking on responsibility for DPAs is complying with all appropriate regulations and guidance (including but not limited to those governing deferred payments). Any and all duties in the Care and Support Statutory Guidance document, in the regulations and in the relevant sections of the Care Act apply equally to any delegated authority as they do to local authorities. The local authority should also seek feedback from people entering into DPAs to satisfy themselves that the service being provided meets the standards expected of the local authority. In the case of delegation of responsibility, the local authority remains ultimately responsible for (and liable for) the DPA.

16. The Local Authority’s Responsibilities whilst the Agreement is in Place

The local authority must at a minimum provide people with six monthly written updates of the amount of fees deferred, of interest and administrative charges accrued to date, and of the total amount due and the equity remaining in the home (the ‘equity limit’ discussed in Section 8, How much can be Deferred?). The local authority should also provide the person with a statement on request within 28 days. It may provide updates on a more frequent basis at its discretion. The update should set out the amount deferred during the previous period, alongside the total amount deferred to date, and should also include a projection of how quickly someone would deplete all equity remaining in their chosen form of security up to their equity limit.

The local authority should reassess the value of the chosen form of security once the amount deferred exceeds 50% of the security (and periodically thereafter), and adjust the equity limit and review the amount deferred if the value has changed.

The local authority may offer people a way to check their statement at any point in the year via an online facility.

The local authority may choose to develop advice and guidance around maintaining a home, renting, and income and also offer services/ products to help the person meet the requirements for maintenance and insurance, but cannot compel a person to take on their product. The local authority must accept reasonable alternative maintenance and insurance services. See Case Study: Deferred Payments Arrangements.

17. Contractual Responsibilities on the Individual whilst the Agreement is in Place

The deferred payment agreement sets out various contractual requirements on the individual as well as on the local authority.

If the local authority is exercising its right to require the adult to make a contribution from income, it should include in the legal agreement provisions requiring the person to notify the local authority of any changes in their income.

They must also notify the local authority of changes in their need for care and support, if those changes are ones which will mean that the authority must or is entitled to stop making further instalments under the agreement or to alter the amount of the instalments.

Similarly if the agreement has been entered into on the basis that  the adult’s property has not been disregarded for the purposes of the financial assessment in section 17 and it is a term of the agreement that the local authority will cease making or reduce the amount of instalments it makes, the agreement should require the person to inform the authority of changes which mean that the property may be disregarded.

The local authority should include in a contract provisions requiring someone to ensure that appropriate arrangements are in place to maintain their home whilst they are in care. In particular, that their home is maintained adequately, and require someone to have in place an arrangement for regular maintenance to take place.

The local authority should also require the person to have adequate insurance for their property. If their home is to be left empty for an extended period of time, the person will need to ensure their insurance covers this adequately and that any terms required by the insurer are met.

The local authority must include in a contract provisions which require the person to obtain the authority’s consent before allowing someone to move into the property after the agreement has been made. In these circumstances, the local authority may (if it is reasonable to do so) require written consent from the person which places the debt owed to the local authority above any beneficial interest they may accrue in the property.

In summary, when it has been decided by both the local authority and the individual that a deferred payment agreement is the appropriate step to take matters forward, a formal agreement is required. The Care and Support Statutory Guidance (9.74-9.84) provides a comprehensive checklist about the information that local authorities should gather for the contents of such agreements.

Local authorities must comply with Unfair Trading Regulations 1999 so the terms should be written in plain common sense English and will not be binding if the terms are unfair to the borrowers. The continuing obligations of the parties that remain in force for the duration of the agreement.

18. Termination of Agreement

A deferred payment agreement can be terminated in three ways:

• at any time by the individual, or someone acting on their behalf, by repaying the full amount due (this can happen during a person’s lifetime or when the agreement is terminated through the DPA holder’s death);
• when the property (or form of security) is sold and the authority is repaid [see Note 5];
• when the person dies and the amount is repaid to the LA from their estate.

Note 5

In the case that a DPA is agreed on the basis of a form of security other than property, local authorities will need to make provision in the agreement for conclusion of the DPA in the event that the given security is disposed of/comes to fruition.

All three scenarios for the termination of the agreement are discussed below, alongside the various options for repayment. On termination, the full amount due (including care costs, any interest accrued and any administrative or legal fees charged) must be paid to the local authority.

If a person decides to sell their home, they should notify the local authority during the sale process. They will be required to pay the amount due to the local authority from the proceeds of the sale, and the local authority will be required to relinquish the charge on their property.

A person may decide to repay the amount due to the local authority from another source, or a third party may elect to repay the amount due on behalf of the individual. In either case, the local authority should be notified of the person’s/the third party’s intention in writing, and the local authority must relinquish the charge on the property on receipt of the full amount due.

If the deferred payment is terminated due to the person’s death, the amount due to the local authority must be either paid out of the estate or paid by a third party. A person’s family or a third party may wish to settle the debt to the local authority by other means of repayment (as may be the case if the family wanted to avoid having to sell the property or means of security), and the local authority must accept an alternative means of payment in this case, provided this payment covers the full amount due to the local authority.

The executor of the will or administrator of the estate can decide how the amount due is to be paid; either from the person’s estate (usually via the sale of the house or potentially via a life assurance policy) or from a third party source.

A local authority should wait at least two weeks following the person’s death before approaching the executor with a full breakdown of the total amount deferred (but a family member or the executor can approach the local authority to resolve the outstanding amount due prior to this point).

Responsibility for arranging for repayment of the amount due (in the case of payment from the estate) falls to the executor of the will.

Interest will continue to accrue on the amount owed to the local authority after the individual’s death and until the amount due to the local authority is repaid in full.

If terminated through a person’s death, the amount owed to a local authority under a deferred payment agreement falls due 90 days after the person has died. After this 90 day period, if a local authority concludes active steps to repay the debt are not being taken, for example if the sale is not progressing and a local authority has actively sought to resolve the situation (or the local authority concludes the executor is wilfully obstructing sale of the property), the local authority may enter into legal proceedings to reclaim the amount due to it. Further information on debt recovery is included at Annex D.

In whichever circumstance an agreement is terminated, the full amount due to the local authority must be repaid to cover all costs accrued under the agreement, and the person (and / or the third party where appropriate) must be provided with a full breakdown of how the amount due has been calculated. Once the amount has been paid, the local authority should provide the individual with confirmation that the agreement has been concluded, and confirm (where appropriate) that the charge against the property has been removed.

In summary, when the agreement is terminated on account of the death of the person, it is advised that the local authority should not approach the executors about the repayment of the deferred sum of the agreement for two weeks after the person’s death.

Interest continues to accumulate under the deferred agreement until the sum is repaid fully. Ninety days after the death of the person, the sum of the full amount accrued should be repaid to the local authority. Where the local authority believes the monies are unlikely to be repaid under the agreement, the local authority may begin proceedings to recover the monies under the agreement.

19. Further Reading

19.1 Relevant information

Chapter 9, Deferred Payment Arrangements, Care and Support Statutory Guidance (Department of Health and Social Care)

See also Deferred Payment Agreement Case Studies.

Appendix 1: Care and Support (Deferred Payment) Amendment Regulations 2017

The Care Support (Deferred Payment) Regulations 2014 are amended by the Deferred Payments Regulations 2017 (“amended regulations”) which changes the qualifying criteria.

At regulation 2 2 (a) (ii) of the amended regulations it states:

“a local authority is required to enter into a deferred payment agreement with an adult if an adult’s needs for care and support…are not being or going to be met  by the local authority under section 18 of the Care Act  and are needs that the local authority considers it would be required to meet under that section by the provision of accommodation in a care home but for the fact that the local authority is satisfied that the adult’s financial resources are above  the financial limit.”

The same provision is inserted into Regulation 3 which deals with circumstances when a local authority is permitted into a deferred payment agreement

At Regulation 3 (1) (a)(ii) of the amended regulations it states,

“A local authority is permitted to enter into a deferred payment agreement with an adult if.. the adult’s needs for care and support ….are not being or going to be met by the local authority under section 18 and are needs that the local authority considers it would be required to meet under that section by the provision of accommodation in a care home but for the fact that the local authority is satisfied that the adult’s financial resources are above the financial threshold.”

The original Care Act legislation included a requirement that local authorities were meeting or going to meet that individual’s needs or believed they would meet their needs if asked.

Local authorities are not required to provide or arrange care home for persons with over £23,250 of assets (self-funders) under section 18 of the Care Act. This generally meant a local authority generally only had to offer a deferred payment agreement if they were meeting or going to meet an adult’s needs under section 19 of the Care Act or considered that they would be asked to do so.

This was not the intended effect of the legislation because it did not protect self-funders from having to sell their home in their life time to pay for their care.

The changes to the legislation and regulations mean that local authorities will have to enter into a deferred payment agreement with a self-funder if

• the local authority would be required to meet their needs but for the fact that they have assets over the upper limit, and
• they meet the other criteria for a mandatory deferred payment agreement.

Local authorities will not, however, be required to meet or fund the needs of a self-funder.

It also does not mean under the new regulations local authorities have to enter into a deferred agreement with an individual who has more than £23,250 other than their main or only home.

It simply means a local authority cannot refuse a loan type of deferred payment agreement to an individual who meets all the mandatory criteria for the deferred payment agreement as set out in Regulation 2 (1) of the Regulations which includes agreeing to the terms and conditions of the agreement.

Prior to the revised regulations, there was no legal requirement on local authorities to enter into a deferred payment agreement unless they had chosen to meet a self-funder’s needs or believed that they would choose to do so, if asked.  As a consequence, local authorities had a choice to exercise before a self-funder met the criteria for a mandatory deferred payment agreement as set out in Regulation 2 (1) of DPA Regulations and the individual became entitled to the benefit of the scheme. This was not the intention of the original deferred payment legislation. It meant that some individuals who were intended to qualify were being denied a loan type deferred payment agreements.

The amended regulations will mean that all individuals who were originally intended to qualify for mandatory deferred payment agreement will now qualify under law which was the original policy intention of the legislators. It also means that local authorities cannot refuse loan type deferred payment agreements where an individual meets the criteria and requests a mandatory deferred payment agreement, as set out in Regulation 2 (1) of DPA Regulations

1. Charges

Local authorities can charge different administration fees for loan type as opposed to traditional deferred payment agreements. The local authorities are permitted to charge for its costs of administration for such an agreement. The costs are to include costs reasonably incurred by the local authority in agreeing, maintaining and terminating the agreement. The costs to the local authority are different for a loan type agreement rather than a traditional agreement. The local authority may charge respective adults different amounts but subject to what is said about average costs they may not charge either adult more than the actual costs incurred in respect of the agreement. All administration fees should be reasonable and must be no more than the costs incurred and local authorities must make individuals aware of the administration fees that are likely to be charged before entering into such agreement.

Audio & Quick Read Summary

1. Introduction to Charging and Financial Assessment

1.1 Introduction and principles

The Care Act 2014 provides a single legal framework for charging for care and support. It enables a local authority to decide whether or not to charge a person when it is arranging to meet a person’s care and support needs or a carer’s support needs.

Where a local authority arranges care and support to meet a person’s needs, it may charge the adult, except where the local authority is required to arrange that care and support free of charge. The overarching principle is that people should only be required to pay what they can afford. People will be entitled to financial support based on a means test and some will be entitled to free care.

The charging framework is, therefore, based on the following principles that local authorities should take into account when making decisions:

• ensure that people are not charged more than it is reasonably practicable for them to pay;
• be comprehensive, to reduce variation in the way people are assessed and charged;
• be clear and transparent, so people know what they will be charged;
• promote wellbeing, social inclusion, and support the vision of personalisation, independence, choice and control;
• support carers to look after their own health and wellbeing and to care effectively and safely;
• be person focused, reflecting the variety of care the variety of options available to meet their needs;
• apply the charging rules equally so those with similar needs or services are treated the same and minimise anomalies between different care settings;
• encourage and enable those who wish to stay in or take up employment, education or training or plan for the future costs of meeting their needs to do so; and
• be sustainable for local authorities in the long term.

Alongside this, local authorities should ensure there is sufficient information and advice available in a suitable format for the person’s needs, in line with the Equality Act 2010 (in particular for those with a sensory impairment, with learning disabilities or for whom English is not their first language), to ensure that they or their representative are able to understand any contributions they are asked to make. Local authorities should also make the person or their representative aware of the availability of independent financial information and advice (see Financial Advice and Information chapter).

1.2 Possible decisions

Following a financial assessment, there are three possible decisions a local authority could make:

• the local authority will provide no financial support. The person or carer might be self-funding, meaning they meet the full cost of their needs;
• the local authority will provide some financial support, but not enough to cover the full personal budget amount. In this case, the person or carer would be expected to contribute the difference;
• the local authority will provide full financial support. In this case, the person or carer will not have to make any contribution towards the cost of their personal budget.

1.3 Common issues for charging

Local authorities have a duty to arrange care and support for those with eligible needs, and a power to meet both eligible and non-eligible needs. In all cases, a local authority has the discretion to choose whether or not to charge under the Care Act, following a person’s needs assessment. If it decides to charge, it must follow the Care and Support (Charging and Assessment of Resources) regulations and have regard to the guidance.

The detail of how to charge is different depending on whether someone is receiving care in a care home, or their own home, or another setting. However, there are some common elements.

Where a local authority chooses to charge, regulations determine the maximum amount a local authority can charge a person.

In care homes, where the financial assessment identifies that a person’s resources exceed the capital limits, the local authority is precluded from paying towards the costs of care. Therefore, local authorities should develop and maintain a policy setting out how they will charge people in settings other than care homes. In deciding what it is reasonable to charge, local authorities must ensure that they do not charge more than is permitted under the regulations and as set out in the Care and Support Statutory Guidance.

The guidance and the supporting annexes assume that the appropriate assessment of needs has been carried out and the local authority has chosen to charge (see Assessment chapter). It therefore provides detail on how to conduct the financial assessment for that person. The local authority has no power to assess couples or civil partners according to their joint resources. Each person must therefore be treated individually.

Where a person lacks capacity, they may still be assessed as being able to contribute towards the cost of their care. However, a local authority must put in place policies regarding how they communicate, how they carry out financial assessments and how they collect any debts that take into consideration the capacity of the person as well as any illness or condition. Local authorities are expected to use their social work skills both to communicate with people and also to design a system that works with, and for, very vulnerable people. Sometimes it is useful to consult with and engage with family members; however, family members may not have the legal right to access the person’s bank accounts. Where possible, local authorities should work with someone who has the legal authority to make financial decisions on behalf of a person who lacks capacity. If there is no such person, then an approach to the Court of Protection is required.

The charging rules also apply equally to people in prison. Whilst prisoners have restricted access to paid employment and benefits (and earnings in prison are to be disregarded for the purposes of the financial assessments), any capital assets, savings and pensions will need specific consideration as set out in Chapter 8, Charging and Financial Assessment, Care and Support Statutory Guidance (Department of Health and Social Care) and relevant annexes. For more information on prisons and approved premises (see Prisons, Approved Premises and Bail Accommodation chapter).

1.4 Capital limits

A financial limit, known as the ‘upper capital limit’, exists for the purposes of the financial assessment. This sets out at what point a person is entitled to local authority support to meet their eligible needs. Full detail is set out in Annex B: Treatment of Capital, and the local authority must read that guidance before undertaking a financial assessment.

The upper capital limit is currently set at £23,250. Below this level, a person can seek means tested support from the local authority. This means that the local authority will undertake a financial assessment of the person’s assets and will make a charge based on what the person can afford to pay.

In the financial assessment capital below the ‘lower capital limit’ – currently set at £14,250 – is not taken into account in the assessment of what a person can pay in tariff income assessed against their capital. Where a person’s resources are below the lower capital limit of £14,250 they will not need to contribute to the cost of their care and support from their capital. However, for adults receiving care and support in locations other than in a care home the limits of £23,250 and £14,250 are simply minimum sums and local authorities have discretion to set their own higher capital limits if they wish, provided they are no lower than £23,250 for the upper limit and £14,250 for the lower limit.

A person with more in capital than the upper capital limit can ask their local authority to arrange their care and support for them, even thought it will not make a financial contribution. Where the person’s needs are to be met by a care package in a care home, the local authority may choose to meet those needs and arrange the care, but is not required to do so. In other cases, the authority must meet the person’s eligible needs if requested. However, these people are not entitled to receive any financial assistance from their local authority and in any case, may pay the full cost of their care and support until their capital falls below the upper capital limit.

2. Charging and Financial Assessment

2.1 Free services

The local authority cannot charge for certain types of care and support which must be arranged free. These are:

• intermediate care, including reablement, which must be provided free of charge for up to six weeks. However, local authorities must have regard to the guidance on preventative support (see Preventing, Reducing or Delaying Needs chapter). This sets out that neither should have a strict time limit but should reflect the needs of the person. Local authorities therefore may wish to apply their discretion to offer this free of charge for longer than six weeks where there are clear preventative benefits, such as when a person has recently become visually impaired;
• community equipment (aids and minor adaptations). Aids must be provided free of charge whether provided to meet or prevent / delay needs. A minor adaptation is one costing £1,000 or less;
• care and support provided to people with Creutzfeldt-Jacob Disease;
• aftercare services / support provided under section 117 of the Mental Health Act 1983;
• any service or part of service which the NHS is under a duty to provide. This includes Continuing Healthcare (see Continuing Healthcare (NHS) chapter) and the NHS contribution to registered nursing care;
• more broadly, any services which a local authority is under a duty to provide through other legislation may not be charged for under the Care Act 2014;
• assessment of needs and care planning may also not be charged for, since these processes do not constitute ‘meeting needs’.

In all other circumstances the local authority has a power to charge, especially around charging for carers’ services, reablement or intermediate care beyond six weeks, and adaptations over £1,000.

2.2 Carrying out a financial assessment

The legal framework for charging is set out in the Care Act 2014. When choosing to charge for services, a local authority must not charge more than the cost that it incurs in meeting the assessed needs of the person. It also cannot recover any administration fee relating to arranging that care and support. The only exception is when a person with eligible needs and assets above the upper capital limit, has asked the local authority to arrange their care and support on their behalf. In such cases, the local authority may apply an administration fee to cover its costs. However, this must not be higher than the cost the local authority has incurred in arranging that care and support. This approach must also apply if the local authority has involved other organisations to deliver its duties in any way.

Where a local authority has decided to charge, except where a ‘light touch assessment’ (see Section 2.6, Light Touch Financial Assessments) is permissible it must carry out a financial assessment of what the person can afford to pay and, once complete, it must give a written record of that assessment to the person. This could be provided alongside a person’s care and support plan or separately or online. It should explain how the financial assessment has been carried out, what the charge will be and how often it will be made, and if there is any fluctuation in charges, the reason for any variation. The local authority should ensure that this is provided in a manner that the person can easily understand, in line with its duties on providing information and advice (see Financial Advice and Information chapter).

In carrying out the assessment, the local authority must have regard to the detailed guidance set out in Annex B: Treatment of Capital and Annex C: Treatment of Income that set out how both capital and income should be treated. A local authority must regularly reassess a person’s ability to meet the cost of any charges to take account of any changes to their resources. This is likely to be on an annual basis (as a Care Act assessment), but may vary according to individual circumstances. However, this should take place if there is a change in circumstance or at the request of the person.

2.3 Capacity

See also Mental Capacity chapter.

At the time of the assessment of care and support needs, the local authority must establish whether the person has the capacity to take part in the assessment. If the person lacks capacity, the local authority must find out if the person has any of the following as the appropriate person will need to be involved:

• enduring power of attorney (EPA);
• lasting power of attorney (LPA) for property and financial affairs;
• lasting power of attorney (LPA) for health and welfare;
• property and affairs deputyship under the Court of Protection;
• any other person dealing with that person’s affairs (e.g. someone who has been given appointeeship by the Department for Work and Pensions (DWP) for the purpose of benefits payments).

People who lack capacity to give consent to a financial assessment and who do not have any of the above people with authority to be involved in their affairs, may require the appointment of a deputy to manage property and financial affairs. Family members can apply for this to the Court of Protection or the local authority can apply if there is no family involved in the care of the person. While this takes some weeks, it then enables the person appointed to access information about bank accounts and financial affairs. A person with dementia for example should not be ‘forced’ to undertake a financial assessment, to sign documents they can no longer understand and should not be punished for any incomplete information that is elicited from them. The local authority should be working with an EPA, a LPA or a deputy instead of a person who is not competent or able to make a decision.

2.4 Capital

In the financial assessment, the person’s capital is taken into account unless it is subject to one of the disregards set out in the regulations and described in Annex B: Treatment of Capital. The main examples of capital are property and savings. Where the person receiving care and support has capital at or below the upper capital limit (currently £23,250), but more than the lower capital limit (currently £14,250), they may be charged £1 per week for every £250 in capital between the two amounts. This is called ‘tariff income’. For example, if a person has £4,000 above the lower capital limit, they are charged a tariff income of £16 per week.

2.5 Income

In assessing what a person can afford to pay, a local authority must take into account their income. However, to help encourage people to remain in or take up employment, with the benefits this has for a person’s wellbeing, earnings from current employment must be disregarded when working out how much they can pay. There are different approaches to how income is treated depending on whether a person is in a care home or receiving care and support in their own home. Full details are set out in Annex C: Treatment of Income and other settings.

As part of the Armed Forces Covenant, the government has committed to making sure veterans are not disadvantaged by their service and when appropriate receive special consideration. To support veterans injured on active service, payments to veterans under the War Pension Scheme, with the exception of Constant Attendance Allowance which is specifically intended to pay for care, must be disregarded in the assessment of what a veteran can pay for care. This brings payments to veterans under the War Pension Scheme into line with Guaranteed Income Payments under the Armed Forces Compensation Scheme.

2.6 ‘Light touch’ and full financial assessments

The decision whether to undertake a light touch or full assessment is normally made by the team assessing finances; practitioners should not pre-empt what the outcome will be.

2.6.1 ‘Light touch’ financial assessments

In some circumstances a ‘light touch’ financial assessment can be carried out. But, the local authority must be satisfied that the person can afford, and will continue to be able to afford, any charges due. This involves gathering sufficient financial information to satisfy the local authority that the person or carer is:

• eligible for no financial support for the local authority;
• eligible for full financial support from the local authority.

It does not involve gathering comprehensive information; a light touch assessment can be more practicable in the following circumstances:

• where a person or carer knows they have significant financial resources and does not wish to undergo a full financial assessment and is willing to pay the full charge;
• where a person or carer has limited capital financial resource and is in receipt of benefits, demonstrating that they would not be able to contribute to their care and support costs;
• where the service to be provided has only a nominal charge that a person is able and willing to meet that charge, and where doing so would not leave them with an income below the minimum income guarantee limit (MIG – the amount of disposable income set by the Government on which a full assessment of finances would be based) (Care and Support Statutory Guidance para 8.23).

Ways a local authority may be satisfied that a person is able to afford any charges due might include evidence that a person has:

1. property clearly worth more than the upper capital limit, where they are the sole owner or it is clear what their share is;
2. savings clearly worth more than the upper capital limit; or,
3. sufficient income left following the charge due.

The local authority must remember that it is responsible for ensuring that people are not charged more than it is reasonable for them to pay. Where a person does not agree to the charges that they have been assessed as being able to afford to pay under this route, a full financial assessment may be needed.

When deciding whether or not to undertake a light touch financial assessment, a local authority should consider both the level of the charge it proposes to make, as well as the evidence or other certification the person is able to provide. They must also inform the person when a light touch assessment has taken place and make clear that the person has the right to request a full financial assessment should they so wish, as well as making sure they have access to sufficient information and advice, including the option of independent financial information and advice.

2.6.2 Full assessment

A full financial assessment involves gathering more comprehensive information about the individual’s or carer’s capital and income. Examples of when a full assessment may be required include:

• when the person or carer is not clear about their level of resources;
• where there is reasonable cause to question the level of resource being declared;
• where the levels of capital resource fall somewhere between the minimum and maximum financial limits i.e. upper and lower capital limits, meaning that the amount of financial support from the local authority cannot be accurately determined without a full assessment.

2.7 Deprivation of assets and debts

People with care and support needs are free to spend their income and assets as they see fit, including making gifts to friends and family. This is important for promoting their wellbeing and enabling them to live fulfilling and independent lives. However, it is also important that people pay their fair contribution towards their care and support costs.

There are some cases where a person may try to deliberately avoid paying for care and support costs through depriving themselves of assets – either capital or income. Where a local authority believes they have evidence to support this, it must read Annex E: Deprivation of Assets concerning the deprivation of assets. In such cases, the local authority may either charge the person as if they still possessed the asset or, if the asset has been transferred to someone else, seek to recover the lost income from charges from that person. However, the local authority cannot recover more than the person gained from the transfer.

Where a person has accrued a debt, the local authority may use its powers under the Care Act to recover that debt. In deciding how to proceed, the local authority should consider the circumstances of the case before deciding a course of action. For example, a local authority should consider whether this was a deliberate avoidance of payment or due to circumstances beyond the person’s control.

Ultimately, the local authority may institute County Court proceedings to recover the debt. However, they should only use this power after other reasonable alternatives for recovering the debt have been exhausted. Further details on how to pursue debts are set out in Annex D: Recovery of Debts.

3. Charging for Care and Support in a Care Home

3.1 Introduction

This section must be read in conjunction with Annex B: Treatment of Capital and Annex C: Treatment of Income.

Where a local authority has decided to charge and undertaken the financial assessment, it should support the person to identify options of how best to pay any charge. This may include offering the person a deferred payment agreement (see Deferred Payment Agreements chapter).

3.2 Top up payments

Where a local authority is meeting needs by arranging a care home, it is responsible for contracting with the provider. It is also responsible for paying the full amount, including where a ‘top up’ fee is being paid. However, where all parties are agreed it may choose to allow the person to pay the provider directly for the ‘top up’ where this is permitted. In doing so it should remember that multiple contracts risk confusion and that the local authority may be unable to assure itself that it is meeting its responsibilities under the additional cost provisions in the Care Act. Local authorities must ensure they read the guidance Annex A: Choice of Accommodation and Additional Payments on the use of ‘top up’ fees. There should be a contractual agreement with the local authority and the person who is funding the top up.

3.3 Short term placements

Where a person is a short-term or temporary resident, there is a degree of discretion or modified charging rules to take account of this.

• A short term resident is someone provided with accommodation in a care home for a period not exceeding eight weeks, for example where a person is placed in a care home to provide respite care. Where a person is a short term resident, a local authority may choose to assess and charge them based on the rules for care or support arranged other than in a care home.
• A temporary resident is someone whose stay in a care home is unlikely to exceed 52 weeks or, in exceptional circumstances, is unlikely to substantially exceed 52 weeks. Because a temporary resident is expected to return home, their main or only home is usually disregarded in the assessment of whether and what they can afford to pay. In addition, for example, certain housing related costs are also disregarded in the financial assessment.

3.4 Personal Expenses Allowance (PEA)

People in a care home will contribute most of their income, excluding their earnings, towards the cost of their care and support. However, a local authority must leave the person with a specified amount of their own income so that the person has money to spend on personal items such as clothes and other items that are not part of their care. This is known as the personal expenses allowance (PEA). This is in addition to any income the person receives from earnings. Ministers have the power to adjust the PEA and have done so annually to ensure it maintains its value. These changes are communicated by Local Authority Circular and are binding. Local authorities have discretion to apply a higher income allowance in individual cases, for example where the person needs to contribute towards the cost of maintaining their former home. Further detail is set out in Annex B: Treatment of Capital.

3.5 Choice of accommodation

Where the care planning process has determined that a person’s needs are best met in a care home, the local authority must provide for the person’s preferred choice of accommodation, subject to certain conditions. This also extends to shared lives, supported living and extra care housing settings. Determining the appropriate type of accommodation should be made with the adult as part of the care and support planning process, therefore this choice only applies between providers of the same type.

The local authority must ensure that the person has a genuine choice of accommodation. It must ensure that at least one accommodation option is available and affordable within the person’s personal budget and should ensure that there is more than one of those options. However, a person must also be able to choose alternative options, including a more expensive setting, where a third party or in certain circumstances the resident is willing and able to pay the additional cost (‘top up’). However, an additional payment must always be optional and never as a result of commissioning failures leading to a lack of choice. Detailed guidance is set out in Annex A: Choice of Accommodation and Additional Payments to which a local authority must have regard.

3.6 Local authority concerns regarding bad debt

There is a potential for bad debt to local authorities due to the power to register land charges. The local authority is unable to place a charge on land where a person has failed to pay their care charges or has transferred their property to a third party. This may result in the local authority:

• being unable to recover outstanding fees when someone dies or sells their property;
• having to involve older people in complicated and potentially distressing court cases.

4. Charging for Care and Support in other Care Settings, including a Person’s own Home

4.1 Introduction

This section should be read in conjunction with the regulations and Annex B: Treatment of Capital and Annex C: Treatment of Income in non-residential care.

These charging arrangements cover any setting for meeting care and support needs outside of a care home. For example, care and support received in a person’s own home, and in other accommodation settings such as in extra care housing, supported living accommodation or shared lives arrangements.

The intent of the regulations and guidance is to support local authorities to assess what a person can afford to contribute towards their care costs. Local authorities should also consider how to use their discretion to support the principles of care and support charging.

The guidance does not make any presumption that local authorities will charge for care and support provided outside care homes, but enables them to continue to allow discretion.

4.2 Minimum Income Guarantee

Because a person who receives care and support outside a care home will need to pay their daily living costs such as rent, food and utilities, the charging rules must ensure they have enough money to meet these costs. After charging, a person must be left with the minimum income guarantee (MIG), equivalent to Income Support plus a buffer of 25%. In addition, where a person receives benefits to meet their disability needs that do not meet the eligibility criteria for local authority care and support, the charging arrangements should ensure that they keep enough money to cover the cost of meeting these disability related costs.

4.3 Financial assessment: Capital

Additionally, the financial assessment of capital must exclude the value of the property which they occupy as their main or only home. Beyond this, the rules on what capital must be disregarded are the same for all types of care and support. However, local authorities have flexibility within this framework; for example, they may choose to disregard additional sources of income, set maximum charges, or charge a person a percentage of their disposable income. This will help support local authorities to take account of local circumstances and promote integration and innovation.

Although local authorities have this discretion, this should not lead to two people with similar needs, and receiving similar types of care and support, being charged differently.

Local authorities should develop and maintain a policy on how they wish to apply this discretion locally. In designing this policy local authorities should consider the objectives of care and support charging and how it can:

• ensure that people are not charged more than it is reasonably practicable for them to pay;
• be comprehensive, to reduce variation in the way people are assessed and charged;
• be clear and transparent, so people know what they will be charged;
• promote wellbeing, social inclusion, and support the vision of personalisation, independence, choice and control;
• support carers to look after their own health and wellbeing and to care effectively and safely;
• be person-focused, reflecting the variety of care and caring journeys and the variety of options available to meet their needs;
• apply the charging rules equally so those with similar needs or services are treated the same and minimise anomalies between different care settings;
• encourage and enable those who wish to stay in or take up employment, education or training or plan for the future costs of meeting their needs to do so;
• be sustainable for local authorities in the long-term;
• administer a charging policy for people who lack capacity or are losing capacity in a way that considers what capacity remains and their rights.

Local authorities should consult people with care and support needs when deciding how to exercise this discretion. In doing this, local authorities should consider how to protect a person’s income. The government considers that it is inconsistent with promoting independent living to assume, without further consideration, that all of a person’s income above the MIG is available to be taken in charges.

Local authorities should therefore consider whether it is appropriate to set a maximum percentage of disposable income (over and above the guaranteed minimum income) which may be taken into account in charges.

Local authorities should also consider whether it is appropriate to set a maximum charge, for example these might be set as a maximum percentage of care home charges in a local area. This could help ensure that people are encouraged to remain in in their own homes, promoting individual wellbeing and independence.

4.4 Financial information the local authority takes into account

Regardless of whether a full or light touch assessment is undertaken, the local authority will take into account both capital and income. In some cases what is taken into account depends on the type of service to be provided; many of these circumstances can be listed as follows:

Examples of capital include:

• buildings and land;
• any main property (for people living in a care home only);
• any additional properties (in all cases);
• national savings certificates and Ulster savings certificates;
• premium bonds;
• stocks and shares;
• capital held by the Court of Protection or a deputy appointed by it;
• cash;
• savings held in a building society or bank accounts of any nature;
• savings held in a trust fund; save as you earn schemes (SAYE);
• unit trusts (see Annex B: Treatment of Capital).
• Examples of income include:Attendance Allowance (including constant attendance allowance and severe disablement allowance);
• Bereavement Allowance;
• Carer’s Allowance;
• Disability Living Allowance (care component);
• Employment and Support Allowance (ESA);
• income Support;
• Jobseeker’s Allowance;
• Universal Credit;
• Pension Credit;
• Personal Independence Payment (daily living component);
• Maternity Allowance;
• industrial Injuries Disablement Benefit or equivalent;
• State Pension;
• Working tax credits (for people living in a care home only). See Annex C: Treatment of Income.

4.5 Disregards under the Care Act

There are a number of factors that must be disregarded or partially disregarded (see Annexes B and C). In all cases if the person or carer being financially assessed has a spouse, parent or child etc, the income and capital of that parent, spouse or child etc must be disregarded (see for example paragraph 8.8 of the Care and Support Statutory Guidance).

4.5.1 Disregarded income

The following income, for example, must be disregarded:

• all earnings through employment or self-employment;
• mobility component of the disability living allowance;
• If the person being financially assessed lives in the community (apart from in a care home) any working tax credit income they receive must also be disregarded.

4.5.2 Non-discretionary property disregard

The value of a person’s main or only home must be disregarded for as long as the following circumstances apply:

• the person is not receiving care in a registered nursing or care home;
• the person’s stay in a care home is temporary and they either: (i) intend to return to their home, or (ii) are taking reasonable steps to dispose of the property and buy a more suitable property to return to;
• where the person no longer occupies the property, but they shared it with: their partner/spouse, or another relative over the age of 60, under the age of 18 or who is incapacitated; and that person still lives there;
• where the person legally owns the property but has no beneficial rights to it (meaning they are not entitled to the proceeds of any sale).

4.5.3 Non-discretionary 12-week property disregard

Local authorities must disregard the value of a person’s main or only home for 12 weeks in the following circumstances (see Annex B: Treatment of Capital):

• when they first enter a care home as a permanent resident;
• when a non-discretionary property disregard unexpectedly ends because the qualifying relative remaining in the property has died or moved into a care home themselves.

This 12-week period allows the person time to consider fully any other options for meeting their needs.

4.5.4 Discretionary property disregard

A local authority can choose to disregard a person’s property in any situation other than those outlined above, if it considers it appropriate. The statutory guidance advises that a local authority will need to balance this discretion with ensuring a person’s assets are not maintained at public expense (see Annex B: Treatment of Capital). Local policy should provide guidance about when a property disregard will or will not be considered and the decision would normally be made by the team assessing finances.

4.5.5 Discretionary 12-week disregard

The local authority can also choose to apply a discretionary 12-week disregard for all capital and incomes if there has been a sudden change in the person’s financial circumstances (see Annex B: Treatment of Capital). In the case of a discretionary property disregard, this should be determined by local policy and the decision would normally be made by the team assessing finances.

5. Charging for Support to Carers

5.1 Eligibility

Where a carer has eligible support needs of their own, the local authority has a duty, or in some cases a power, to arrange support to meet their needs. Where a local authority is meeting the needs of a carer by providing a service directly to a carer, for example a relaxation class or driving lessons, it has the power to charge the carer. However, a local authority must not charge a carer for care and support provided directly to the person they care for under any circumstances.

5.2 Considerations for charging

Local authorities are not required to charge a carer for support and indeed in many cases it would be a false economy to do so.

When deciding whether to charge, and in determining what an appropriate charge is, a local authority should consider how it wishes to express the way it values carers within its local community as partners in care, and recognise the significant contribution carers make. Carers help to maintain the health and wellbeing of the person they care for, support this person’s independence and enable them to stay in their own homes for longer. In many cases of course, carers voluntarily meet eligible needs that the local authority would otherwise be required to meet.

Local authorities should consider carefully the likely impact of any charges on carers, particularly in terms of their willingness and ability to continue their caring responsibilities. It may be that there are circumstances where a nominal charge may be appropriate, for example to provide for a service which is subsidised but for which the carer may still pay a small charge, such as a gym class.

Ultimately, a local authority should ensure that any charges do not negatively impact on a carer’s ability to look after their own health and wellbeing and to care effectively and safely.

While charging carers may be appropriate in some circumstances, it is very unlikely to be efficient to systematically charge carers for meeting their eligible needs. This is because excessive charges are likely to lead to carers refusing support, which in turn will lead to carer breakdown and local authorities having to meet more eligible needs of people currently cared for voluntarily. As an example, work carried out by Surrey County Council found that if even 10% of people with care and support needs in families supported by carers presented to the council with eligible needs as a result of carer breakdown, the resulting cost would be 3 times the current total budget for carer support.

5.3 Financial assessment

Local authorities may also wish to consider whether charging is proportionate when carers’ assessments are undertaken for small scale help. There is a risk that financial assessments might become the most costly part of the process and something that is administratively burdensome.

Where a local authority takes the decision to charge a carer, it must do so in accordance with the non-residential charging rules. In doing so, it should usually carry out a financial assessment to ensure that any charges are affordable. However, it may be more likely, in the case of a carer, that the carer and the local authority will agree that a full financial assessment would be disproportionate as carers often face significantly lower charges.

In such cases, a local authority may choose to treat a carer as if a financial assessment has been carried out. When deciding whether or not to undertake a light touch financial assessment, a local authority should consider both the level of the charge it proposes to make as well as the evidence the person is able to provide that they will be able to afford the charge. They must also inform the person when a light touch assessment has taken place and make clear from the outset that the person has the right to request a full financial assessment should they so wish.

A carer’s assessment may identify that the carer’s needs for support could be met by arranging time away from the person they care for, for instance so that they can stay on top of other aspects of their lives, and that in order to achieve this services need to be provided to support the cared for person in their absence. Such services would be provided direct to the cared for person, even though they may meet the needs of both parties and may have been identified through the carer’s assessment. The local authority may not charge the carer for these services, and any charges should be based on the local authority’s policy on charging for non-residential care and support.

6. Self-Funding

See also Self Funders chapter.

6.1 Requesting local authority support to meet eligible needs

6.1.1 Above the capital limit

People with eligible needs and financial assets above the upper capital limit may ask the local authority to meet their needs. This could be for a variety of reasons such as the person finding the system too difficult to navigate, or wishing to take advantage of the local authority’s knowledge of the local market of care and support services. Where the person asks the local authority to meet their eligible needs, and it is anticipated that their needs will be met by a care home placement, then the local authority may choose to meet their needs, but is not required to do so.  In other cases, where the needs are to be met by care and support of some other type, the local authority must meet those eligible needs.

Local authorities should therefore take steps to make people aware that they have the right to request the local authority to meet their needs, in certain circumstances even when they have resources above the financial limits and would not be entitled to financial support with any charges. They should also be clear that this right does not extend to needs met by a care home placement, although local authorities may choose to apply the same approach locally. Local authorities should also offer support to people in meeting their own needs, including providing information and advice on different options, and may offer to arrange contracts with providers (see Information and Advice chapter).

6.2 Fees

Where the person’s resources are above the financial limit, the person’s entitlement to local authority support in meeting their needs may be dependent on the request having been made. Therefore it is important that the person, and any carer, advocate or other person they wish to involve, are aware of this ability and the consequences for their care and support. The local authority must make clear to the person that they may be liable to pay an arrangement fee in addition to the costs of meeting their needs to cover the costs of putting in place the care and support required.

Arrangement fees charged by local authorities must cover only the costs that the local authorities actually incur in arranging care.  Arrangement fees should take account of the cost of negotiating and / or managing the contract with a provider and cover any administration costs incurred.

Where a local authority chooses to meet the needs of a person with resources above the financial limit who requires a care home placement, it must not charge an arrangement fee.  This is because it would support that person under its power (rather than its duty) to meet needs, and the ability to charge the arrangement fee applies only to circumstances when the authority is required to meet needs.

Local authorities must not charge people for a financial assessment, a needs assessment or the preparation of a care and support plan

It may be appropriate for local authorities to charge a flat rate fee for arranging care. This can help ensure people have clarity about the costs they will face if they ask the local authority to arrange their care. However, such flat rate costs must be set at a level where they do not exceed the costs the local authority actually incurs.

6.3 Advice and information

The information provided to the person following a financial assessment should include information on the right to request the local authority to meet their needs – and how they would be charged – and the advice and support that is available to help people make arrangements to meet their own needs whatever type of support they require.

6.4 Charges

A local authority will be under a duty to meet a person’s eligible needs when requested to do so and their needs are to be met by care and support other than in a care home. However, where the person has resources above the financial limits the local authority may charge the person for the full cost of their care and support.

In such circumstances, the person remains responsible for paying for the cost of their care and support, but the local authority takes on the responsibility for meeting those needs. This means that the local authority may for example provide or arrange care and support, or make a direct payment which may be a paper based exercise, or some combination of these. For further information on how to meet needs and the options available, see Care and Support Planning chapter.

The local authority must assure itself that whilst the person remains responsible for paying for their own care, they have sufficient assets for the arrangements that it puts in place to remain both affordable and sustainable. The local authority should also take steps to avoid disputes and additional liabilities by securing a person’s agreement in writing to pay the costs that they are responsible for in meeting their needs, including payments to providers. Local authorities should make similar arrangements with any third parties that agree to contribute towards these costs.

7. Pension Reforms

Reforms to defined contribution pensions came into effect in April 2015. The aim of the reforms is to provide people with much greater flexibility in how they fund later life. The government expects there to be a range of new products that people will use to manage and access money from their pensions as and when they need it, and where possible, these will be treated similarly to existing draw down products for charging purposes.

The Pension Wise service helps people to make informed choices at the point of retirement. This will include information and advice on later life, including the risk that they may need care and support in the future, and will have to pay for it.

For the purposes of charging, a local authority must follow the guidance set out on the treatment of income and capital in Annex B: Treatment of Capital and Annex C: Treatment of Income and treat a person’s assets accordingly. Where a person has chosen to withdraw funds from their pension pot and manage it directly, for example combining it with other assets rather than through a pensions’ product, this may be treated as capital under the rules laid out in Annex B: Treatment of Capital.

8. Complaints

A person may wish to make a complaint about any aspect of the financial assessment or how a local authority has chosen to charge. A local authority must make clear what its complaints procedure is and provide information and advice on how to lodge a complaint (see Complaints chapter).

Complaints about the level of charge levied by a local authority are subject to the usual care and support complaints procedure as set out in The Local Authority Social Services and NHS Complaints (England) Regulations 2009.

Where a local authority has established a special panel or fast track review processes to deal with financial assessment / charging issues, they should remind the person they still have access to the statutory complaints procedure.

9. Further Reading

9.1 Relevant chapter

Financial Information and Advice

9.2 Relevant information

Chapter 8, Charging and Financial Assessment, Care and Support Statutory Guidance (Department of Health and Social Care)

Appendix 1: Summary for Adult Social Care Practitioners

In summary, adult social care practitioners should be familiar with these concepts about financial assessment and charging:

• purpose of a financial assessment and possible outcomes;
• when a financial assessment must be completed;
• when a financial assessment should not be completed;
• difference between a light touch financial assessment and a full assessment;
• what is taken into account in a financial assessment and what is disregarded;
• what a top-up is and the local policy around top-ups;
• what a deferred payment is;
• what a deprivation of assets is.

 Appendix 2: Care and Support Statutory Guidance Annexes

• Annex A: Choice of accommodation and additional payments
• Annex B: Treatment of capital
• Annex C: Treatment of income
• Annex D: Recovery of debts
• Annex E: Deprivation of assets