Deferred Payment Agreements.

What it is

A DPA is essentially a loan from your local authority secured against the property of someone in permanent care. The local authority pays the care home directly for the fees that the resident cannot meet from their income and savings. The accumulated amount, plus interest and fees, is repaid when the property is sold. In practice that often means after the resident has died.

The agreement was made mandatory across all English local authorities by the Care Act 2014. Before 2015 some councils offered them at their own discretion. Now every council with adult social care responsibility must offer a DPA to anyone who meets the eligibility criteria.

Mandatory eligibility

The council must offer a DPA if all of these are true:

• The person has been assessed as having care and support needs that the council is willing to meet
• The person is, or will be, in permanent residential or nursing care
• The person owns property that forms part of the means-test calculation (and no qualifying person continues to live in it)
• The person has total non-property assets below £23,250
• The person has mental capacity to enter the agreement, or a legally authorised person can act for them

Councils may also offer DPAs at their discretion in cases that do not meet all the mandatory tests. Practice varies.

Costs to expect

DPAs are not free money. Three costs apply:

• Interest. Charged on the running balance, accruing weekly. The rate is set nationally by the Department of Health and Social Care, updated twice a year, and is published as a fixed maximum that councils can charge. Most councils charge the maximum. As of 2024 the maximum rate was around 4.5% but it varies with gilt yields.
• Set-up fee. A one-off charge for the administrative and legal cost of putting the agreement in place, typically £400 to £1,500 depending on the council. Includes Land Registry charges.
• Annual admin fee. Some councils charge a yearly sum to cover ongoing administration. Some do not. Where charged this is typically £100 to £400 per year.

The interest and fees are added to the running balance and repaid when the property is sold, so the family does not pay anything monthly. They simply reduce the amount that comes back to the estate.

How much you can defer

The council does not lend the full property value. They typically cap deferrals so that the running balance stays within around 80% of the property’s market value, leaving an equity buffer for fluctuations in house prices and interest charges. The exact cap varies by council and is renegotiated as the agreement runs.

The resident is expected to contribute their pension and other income toward the fees, just as they would if they were paying directly. The DPA covers the gap between the fees and the resident’s assessable income. So a placement at £1,300 a week with the resident contributing £350 of pension income deferred at £950 a week. Over four years that accumulates to roughly £200,000 plus interest and fees.

Most homes sold to repay DPAs are sold for less than would be expected after years of unmaintained occupation, often a quarter to a third less than equivalent properties in better condition. This is one of the structural reasons families dislike DPAs but choose them anyway.

When the DPA ends

A DPA terminates when any of these happens:

• The property is sold. The proceeds first repay the council, then the rest goes to the resident or their estate.
• The resident dies. The estate has 90 days to repay the full balance, usually by selling the property.
• The resident leaves permanent care. The DPA is closed and the balance becomes repayable, with a grace period to arrange repayment.
• The resident’s circumstances change such that they no longer need to defer (significant inheritance, lottery win, change in care need).

DPA vs equity release lifetime mortgage

Both raise cash against the property without an immediate sale. The differences matter:

Generally, a DPA is the better option when the property is vacant and the resident wants to defer paying. Equity release becomes attractive when a spouse or partner needs to stay in the home and a DPA is unavailable, or when the family prefers more flexibility about repayment.

The interaction with CHC

If a CHC assessment is in progress, deferring the question of how to fund care via a DPA can be sensible while the outcome is unknown. A CHC eligibility decision removes the means test entirely, in which case the DPA is not needed and is wound up.

If the assessment is refused and the family appeals, the DPA covers the fees during the appeal. The council may seek to recover the deferred amount only after the appeal is resolved. See the options after refusal for the full picture.

Practical steps

1. Confirm with the council that a permanent care placement is in place and that a financial assessment has been completed.
2. Request the council’s DPA policy document. It will set out their specific interest rate, fees and equity cap.
3. Obtain an independent valuation of the property to establish the starting position.
4. Get independent advice on whether a DPA is the right vehicle, particularly compared to equity release or an immediate-needs annuity.
5. Sign the formal agreement. The council registers a Land Registry charge against the property. From this point the council pays the fees and the balance accrues.