The new Universal Deferred Payment Scheme
There are currently two deferred payment mechanisms in place at the moment. One is the deferred payment scheme, which is optional for Local Authorities to provide and the other is when a s.22 HASSASSA (Health And Social Services And Social Security Adjudications Act 1983) charge is applied.
The s.22 charge is non interest bearing during lifetime, but the day after death interest begins to arise. This charge is put in place by the Local Authority when some has property and cannot or does not pay (and should) for their care. The difference with this and the deferred payment scheme is that the individual does not necessarily consent to this, it is something imposed upon them, whether or not they agree. As no agreement is sought, there is usually no administrative charge for this.
The deferred payment scheme that is currently in place in not mandatory for Local Authorities offer, so not all of them do. There is no interest payment on the debt, like the s.22 charge, but the difference is that interest does not begin to arise until 56 days after death. There are commonly administration fees to put this charge in place, which can be IRO£500-£750. The individual does have to agree to this, unlike the s.22 charge.
I’ve never really understood why someone would agree to a deferred payment scheme, which is a trade off between no interest for 56 days on the loan and a fee to set it up, as it is nearly always cheaper to pay the interest earlier, but not have the fee for IRO£500-750.
The white paper on the reforms is silent on the issue of the s.22 charge, however what is clear is that the Government propose to abolish the current deferred payment scheme and make the new one mandatory. Interest will arise (discussions have been around 4% – which with inflation at 2% , so is a commercial rate). The idea is that where someone has to sell their house to pay for care fees, this will cause them less stress, as it must be offered to them. There is likely to be a fee for setting this up. How can it be less stressful, when although the house may not be sold, a debt is arising against it and unless the debt is paid, eventually the house would need to be sold to pay the debt!!
So if the s.22 charge remains and continues to be interest free (although clearly the Government may choose to make it interest bearing) why would anyone take up this new scheme? They have to pay to set it up and pay interest on the loan amount, why would anyone choose that in preference to a s.22 charge?
It is another part of these funding reforms that sounds great – that all Local Authorities have to provide it, but the reality of what is proposed is not as fabulous as it first sounds.