For example: if Jane owns a house that is worth £400,000, the maximum amount that she could defer would be: £400,000 less £40,000 less £14,250 = £345,750.

The equity limit calculation must leave a buffer to cover subsequent interest accruals and provide a small cushion in case of variations in the value of your chosen security, such as a fall in house prices. 

When calculating the equity limit, the local authority must include any interest accrued and fees to be deferred. 

Local authorities must not allow additional amounts for care to be deferred beyond the equity limit and must refuse to defer care costs beyond this. 

Six monthly statements are issued by local authorities that detail how much has already been deferred, the interest and charges accrued and the amount remaining.  

The equity limit review trigger  

When 70 per cent of the value of the security is deferred, the local authority should review the cost of care. 

They should discuss when you might be eligible for financially assessed support from them, the implications for any current top-up payments, and consider if a DPA is still the best way to meet these costs.  

Repaying the local authority

The money owed, including any interest and administrative charges, must be repaid when you sell your home.

If you die, the executor of your will is responsible for repaying the amount owing on:

• the date on which the property or asset is sold or disposed of; or
• 90 days after the date of death – whichever is sooner.

Summary and next steps 

With an aging population, the need for social care is not going to go away and it is likely that clients faced with the costs of meeting social care will increasingly need support and advice from financial advisers, not only for themselves but also for their parents or other family members.  

You can make a significant difference to client outcomes by having a more detailed understanding of the long-term care market and the options available. 

If you want to give advice on long-term care planning, you will need a relevant qualification like the LIBF’s Level 4 Certificate in Long Term Care and Later Life Planning (CertLTCP) or the CII Level 3 Certificate in Long Term Care Insurance.

Even if you are not going to give advice on care, the qualification will enhance your knowledge and develop your understanding of the long-term care market, including legal, taxation and regulatory issues and the responsibilities of local authorities, so that you understand the issues that clients or their families will face.  

Richard Cooper is the business development manager at the London Institute of Banking and Finance