Deferred Payment Agreement

A Deferred Payment Agreement (DPA) allows a person entering a care home to defer paying their care costs if they own property (or another asset acceptable as security) and their other capital is below £23,250. Under the Care Act 2014, the council must offer a DPA to eligible individuals. The council effectively acts as a lender, paying the care home fees and registering a legal charge on the property. Interest accrues daily at a rate set nationally and reviewed twice a year. The debt, plus accrued interest and an administration fee, is repaid when the property is sold — usually on the person's death or on an earlier sale. Get independent financial advice from a specialist regulated by the FCA before deciding.

What it means in practice. A DPA does not make care free; it changes when you pay. The council secures the debt against your property with a legal charge, and you normally still contribute from your income while the deferral runs, keeping a disposable income allowance. There is usually an equity limit, so the council will not defer beyond a proportion of the property value, and you remain responsible for insuring and maintaining the property. Many people rent the property out during the deferral, which reduces or removes the need to defer anything at all.

A worked example. Arthur moves permanently into a care home. He owns a house worth £220,000 and has £18,000 in savings. His savings sit below the upper capital threshold once the mandatory twelve-week property disregard has run, so the council must consider a DPA. It agrees to defer his contribution up to an equity limit, registers a charge at the Land Registry, and Arthur pays a weekly amount from his pension income while the rest accrues. His daughter lets the house, and the rent covers most of the weekly fee, so the deferred balance grows slowly. When the house is eventually sold, the council recovers the deferred sum plus interest and fees, and the balance passes to the estate.

Common pitfalls. The largest is never asking. Families routinely sell a home in a hurry to fund care when a DPA would have kept it in the estate and allowed a sale in a better market. Others assume the interest makes it a bad deal without comparing it against the cost of a rushed sale. Watch the administration and valuation charges, check the equity limit before assuming the whole fee can be deferred, and remember the council can refuse where it cannot obtain adequate security.

How it relates to other terms. Eligibility flows from the financial assessment, which follows a care needs assessment. Transferring the property to a relative to avoid the charge risks a finding of deprivation of assets. Where health needs are primary, NHS Continuing Healthcare removes the charging question entirely. Someone managing a relative's affairs will normally need a registered Lasting Power of Attorney to sign a DPA.

What to do next. Read our deferred payment guide and ask the council in writing whether a DPA is available before agreeing to sell anything. The detailed DPA guide covers interest, equity limits, and letting the property, and care home fees explains top-up payments.