Meeting documents
Executive (I)
Tuesday, 1st April, 2014
| REPORT TO: | 24 |
| DECISION NUMBER: | PH/41/2014 |
| EARLIEST DATE FOR DECISION: | 1st April 2014 |
THE DEFERRED PAYMENTS SCHEME | |
| Matter for Consideration: The introduction of a formal Deferred Payments Scheme available to eligible service users entering residential care. | |
| Information: When an individual is supported by the Local Authority to move into residential care, they are required to meet the full cost of their care if they have savings and/or property valued at more than £23,250. This situation applies to many older people moving out of their home and into residential care. Often the value of their home is a large fraction of their overall assets and it is not always possible to draw on the capital tied up in their property. In this situation, people are faced with the prospect of selling their home to pay for their care fees in an already difficult period in their life causing further stress and anxiety. In order to address this situation, the Health and Social Care Act 2001, introduced the concept of a Deferred Payments Scheme. This legislation provides for the possibility of eligible service users putting off the sale of their home (or a property they have a beneficial interest in) when they move into residential care and delaying the payment of fees. Instead of paying the care homes fees in full, the resident will be financially assessed ignoring the value of the property, and asked to contribute a lesser amount towards the cost of their care. The Council will effectively provide an interest free loan and pay the difference between the amount contributed by the service user and the usual fee paid to the care home by the local authority. However, in order to protect its interests, the Council will take out a legal charge on the service user’s property, subject to their consent and if necessary any other parties’ consent. When the property is eventually sold, the debt can usually be recovered in full. Interest is not charged on the amount due until 56 days after the person has died. According to the 2001 regulations, deferred payments schemes should be available to people in residential or nursing homes who have assets (apart from the value of their home) under the upper capital limit of £23,250, cannot meet the full cost of their care from their regular income and do not wish to sell their home or are unable to sell their home quickly enough. The availability of such a scheme is not a statutory responsibility but councils are expected to have this type of arrangement in place and could be challenged if they do not exercise discretion to offer a deferred payment in individual cases. Some factors which need to be considered when setting up a deferred payments scheme include: • The need for a legal agreement between the service user and the council • The need to obtain a valuation of the property, otherwise eventual sale proceeds may not cover outstanding debt. • The recovery of costs relating to the valuation of the property, legal administration, land registry charges etc. • The need to establish eligibility criteria, as the Council has discretion over whether or not to agree deferred payment in individual cases. • The need to identify who will keep the property in good repair (the property needs to be kept secure, maintained and insured). • People will be able to top up their care home fees directly out of their own resources (only possible with a deferred payments scheme). The Council is currently operating a less formal deferred payment arrangement under powers given by Section 22 of the Health and Social Services and Social Security Adjudication Act (HASSASSA) 1983. When a service user enters residential care, a legal charge is automatically taken out on their property after the 12 week disregard period. (During the first twelve weeks in residential care the value of the resident’s property is generally not taken into account in the financial assessment). Section 22 of the HASSASSA 1983 provides councils with an alternative means of recovering costs from residents who own property and fail to qualify for free care. The power allows a local authority to take out a legal charge on the resident’s property with interest becoming payable from the day after the resident dies until the debt is repaid. However, the guidance issued specifies a requirement to offer a formal deferred payment arrangement in the first instance. Local authorities are advised not to use section 22 in instances where a resident is willing to pay fees but do not wish to sell their house or cannot sell their house quickly enough to meet the costs. Instead it should be reserved for cases where residents are unwilling to pay their assessed contributions either now or in the future. In these cases there should also be the expectation that service users will actively market their property as soon as practicable in order to achieve an early sale. The Care Bill (HL) 2013-2014 provides for a new legislative requirement to offer a deferred payments scheme. From April 2015, the Government plans to ensure that all people who own their own home and receive care and support from the local authority are offered the option of a deferred payment arrangement in the future. Clause 16 allows for regulations to require local authorities to offer deferred payment arrangements on a universal basis, and charge interest on these arrangements. The intention is to enable more people to defer care charges and protect their homes. Legislation allows the Council to make a judgement as to whether a service user can access the deferred payments scheme. It is assumed that the individual meets the Council’s Fair Access to Care Services criteria and that the outcome of a care assessment is that the individual has needs that can only be met on a permanent basis within a care home. It is proposed that in order to qualify for the Scheme the applicant must meet the following criteria: a. To have entered permanent residential care on or after the 9th April 2001. b. They do not wish to sell their home or they are in a position that if it is marketed it may not sell for some time. c. They own or part own a property and this equates to more than the upper capital limit of £23,250 (2013/14). d. Any outstanding mortgage (or other charge) on the property must leave sufficient value to meet the criteria in c. above and there must be sufficient resources to meet any mortgage payments as they fall due. e. They have insufficient income and other assets of less than £23,250, excluding the value of their main or only home, to meet the cost of their care. f. They must agree to keep the house adequately insured to cover both fire and theft. g. They must be able to demonstrate that the property will be kept in a good state of repair and adequately secured in order to preserve the market value of the property. h. They must agree to the legal charge being placed on the property. i. They must agree to pay the legal costs associated with setting up a deferred payments agreement. j. They must agree that it is their responsibility to seek independent financial advice on the advisability of entering into the scheme. k. They must be able to enter into such an agreement in terms of mental capacity or have an appropriately authorised representative. | |
| Does the information submitted include any exempt information? | NO |
| Legal Considerations: There is a need to have regard to the Health and Social Care Act 2001 and comply with supporting guidance unless it can be demonstrated that there is good reason not to. The Care Bill is currently at the Committee stage in the House of Commons and if given final approval, will place a mandatory requirement on local authorities to introduce a Deferred Payments Scheme from April 2015. | |
| Personnel Considerations: Access to the Deferred Payments scheme will be subject to eligibility criteria, notably whether someone needs residential care and whether they have limited assets other than a property. Beyond this the scheme will not actively discriminate on the basis of equalities characteristics such as old age, physical disability, gender, sexual orientation, belief or socio-economic status. However it is likely there will be a differential level of uptake of deferred payments across different population groups. | |
| Financial Considerations: There are costs associated with the introduction of a deferred payments scheme. There will be administrative costs, legal costs such as fees for land registry and searches and possibly costs associated with a valuing a property. It is recommended that these costs are either recovered at the time the agreement is drawn up or if this would cause unnecessary hardship, then payment could also be deferred and added to the debt to be settled at a later date. It is suggested that fees are set in line with the current legal fees for administering property charges and estimated valuation costs. These fees should be reviewed on an annual basis. From a financial point of view it would be preferable if people entering residential care actively marketed their property with a view to making a sale as soon as possible, for the following reasons: a. If a person is able to release the equity tied up in a property, this would mean that they would be able to fund their own care directly rather than the Council paying fees to the care home on their behalf. As interest is not charged by the Council until 56 days after the individual has passed away there is an opportunity cost to the Council in terms of tying up money in a deferred payment and not being able to invest funds at current market rates to protect against inflation. b. There are approximately 100 properties at the current time with a legal charge registered against them. The number of properties empty for more than 6 months will impact on the New Homes Bonus which is an important funding stream for the Council. c There is an additional adverse financial impact on the Council in terms of foregone council tax receipts. Under the terms of the scheme the service user will not keep more of their income or capital than would normally be the case. However, if the service user is to be expected to maintain their property and incur certain costs e.g. insurance and repairs, it may be necessary to factor this into their financial assessment and increase the amount of money they are allowed to retain for personal expenses. This may lead to a reduction in the amount the service user is able to pay towards the cost of their care and increase the amount the payable by the Council. The scheme does not mean that service users do not need to sell their property or repay debt to cover the cost of their residential care; it merely delays the sale until after the person has passed away or chooses to end the agreement. People entering into a deferred payments agreement will be eligible to claim Attendance Allowance (or Disability Living Allowance). This means that they may have extra income to contribute towards the weekly cost of their care reducing the amount of deferred debt eventually payable. However, other benefits may be subject to a reduction as the Department for Work and Pensions may include the value of the property in their financial assessments. People eligible to take advantage of the scheme will be advised to seek independent financial advice as their entitlement to certain benefits may be affected. | |
| Performance Management Considerations: The Scheme will be administered by the Social Care Benefits Team on behalf of Adult Services. Any issues relating to the operation of the scheme will be reported to the Adults Financial Policy Group. | |
| Risk Management Considerations: There is risk that a charge may have already been registered against a property but the amount of debt due cannot be quantified e.g a loan with interest accruing. The legal searches undertaken will establish if there are other charges registered against the property which take priority. | |
| Relevant Officer: Delyth Curtis - Assistant Chief Executive (Adult Services) | |
| Relevant Cabinet Member: Councillor K. Rowson | |
| Consultation Undertaken: As a result of the Government’s intention to require all Councils to have deferred payments schemes in place by 2015, local consultation has been limited to focussing on how the scheme should be implemented rather than whether the Council should introduce a scheme. The key finding from the consultation conducted is that the financial implications of moving into residential care are confusing and complex and this causes a great deal of stress and anxiety for service users and their families. Further guidance on many of the issues relating to the move into residential care is required eg, top-up payments, financial assessments, criteria for standard and higher residential care, etc. | |
| Background Papers: | |
| Is this a key decision? | NO |
| Is the decision required in less than 5 days? | NO |
| Recommendations: To approve the introduction of a Deferred Payments Scheme as set out in the guidance document. To approve the recovery of costs incurred in drawing up a Deferred Payments agreement to include : A fee of £60 plus VAT for the valuation of the property if not supplied by the service user. A fee for the first registration of the property if required, currently £100 to cover legal administration plus VAT plus land registry charges. A fee for drawing up the agreement to cover legal administration and costs, currently £300 plus VAT. | |
| Reasons for Recommendations: The Care Bill currently passing through the House of Commons contains provisions for a universal deferred payment scheme. All authorities will have a duty to offer deferred payments, with consistent rules for who is eligible, what fees they can defer and for how long. The intention is to give people peace of mind, choice and control when they enter residential care and to ensure that no one has to sell their home in their lifetime to pay for care. | |
| Is the recommendation contrary to a plan or strategy adopted or approved by the Council? | NO |
| Is the recommendation in accordance with the Council’s approved Budget? | YES |
| Other alternative options to be considered: To delay the implementation of the Scheme until further guidance is issued on the new universal scheme. | |
| Policy, Overview, and Scrutiny Committee Chairman (where appropriate) Date Informed: N/A Date Approved: N/A | |
| DECLARATION(S) OF INTEREST (if applicable) None | |
| Decision: The Cabinet Member agreed the recommendation as outlined above namely: 1. To approve the introduction of a Deferred Payments Scheme as set out in the guidance document. 2. To approve the recovery of costs incurred in drawing up a Deferred Payments agreement to include : A fee of £60 plus VAT for the valuation of the property if not supplied by the service user. A fee for the first registration of the property if required, currently £100 to cover legal administration plus VAT plus land registry charges. A fee for drawing up the agreement to cover legal administration and costs, currently £300 plus VAT. | |
| Date: | 1st April 2014 |
| Reason for Decision: The Care Bill currently passing through the House of Commons contains provisions for a universal deferred payment scheme. All authorities will have a duty to offer deferred payments, with consistent rules for who is eligible, what fees they can defer and for how long. The intention is to give people peace of mind, choice and control when they enter residential care and to ensure that no one has to sell their home in their lifetime to pay for care. | |
Date of Publication: | 1st April 2014 |
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