Summary: Mr X complained the Council wrongly stopped Mr Y using a direct payment managed account when his capital increased above £23,250. We upheld the complaint, finding the Council did not properly consider if Mr Y could keep the arrangement and continue using the account paying the full cost for his care. The resulting changes to Mr Y’s care caused distress and potentially increased his costs. We considered these impacts an injustice, and while the Council had provided a partial remedy to the complaint we recommended it take further action. The Council agreed to this and to learn lessons from this complaint as part of a review of its direct payment policy.

The complaint

1. Mr X complained on Mr Y’s behalf. Mr Y is an adult with care and support needs. Mr X has a power of attorney to deal with Mr Y’s finances. Mr X complained the Council wrongly closed a direct payment managed account that Mr Y used to pay for his care and support, after his capital increased above the ‘upper capital threshold’ (£23,250). Mr X said the Council should have allowed Mr Y to continue using the account, treating him as a full-cost payer.
2. Mr X said because of the Council’s decision, he and Mr Y quickly had to change the arrangements for Mr Y to keep his existing care and support. This caused them both some distress. Mr X also said Mr Y now paid more for his care and support because of administration and insurance costs, than if the Council had charged him ‘full cost’ for his care and support. Mr X also had a concern the Council would no longer monitor Mr Y’s care needs. He said Mr Y would be vulnerable if Mr X or Mr Y’s personal assistant were no longer able to support him.

Back to top

The Ombudsman’s role and powers

3. We investigate complaints of injustice caused by ‘maladministration’ and ‘service failure’. I have used the word fault to refer to these. We consider whether there was fault in the way an organisation made its decision. If there was no fault in how the organisation made its decision, we cannot question the outcome. (Local Government Act 1974, section 34(3), as amended)
4. We must also consider whether any fault has had an adverse impact on the person making the complaint. I refer to this as ‘injustice’. If there has been fault which has caused significant injustice, or that could cause injustice to others in the future we may suggest a remedy. (Local Government Act 1974, sections 26(1) and 26A(1), as amended)
5. If we are satisfied with an organisation’s actions or proposed actions, we can complete our investigation and issue a decision statement. (Local Government Act 1974, section 30(1B) and 34H(1), as amended)

Back to top

How I considered this complaint

6. I considered evidence provided by Mr X and the Council as well as relevant law, policy and guidance.
7. I gave Mr X and the Council chance to comment on a draft version of this decision statement. I took account of any comments they made in response, before finalising the decision statement.

Back to top

What I found

Relevant law and guidance

8. Sections 9 and 10 of the Care Act 2014 require councils to carry out an assessment for any adult with an appearance of need for care and support. They must provide an assessment to everyone regardless of their finances or whether the council thinks the person has eligible needs. The assessment must be of the adult’s needs and how they impact on their wellbeing and the results they want to achieve.
9. Where the Council decides an adult has eligible needs for care and support it should draw up a care and support plan, identifying how their needs will be met. This should include a personal budget which is the amount of money needed to meet the needs identified in the assessment and recorded in the plan.
10. Government guidance says the “guiding principle” for councils when care planning is that it should be “person-centred and person-led”. This is so the person needing care receives care “in ways that work best for them […]”. (Care and Support Statutory Guidance, paragraph 10.5)
11. It also says:

• “care and support should put people in control of their care, with the support that they need to enhance their wellbeing and improve their connections to family, friends and community”. (see Care and Support Statutory Guidance, paragraph 10.1)
• “The person must be genuinely involved and influential throughout the planning process and should be given every opportunity to take joint ownership of the development of the plan with the local authority if they wish, and the local authority agrees. There should be a default assumption that the person, with support if necessary, will play a strong pro-active role in planning if they choose to. Indeed, it should be made clear that the plan ‘belongs’ to the person it is intended for, with the local authority role being to ensure the production and sign-off of the plan to ensure that it is appropriate to meet the identified needs”. (as above, paragraph 10.2)

12. Ways in which a personal budget can be administered include as a managed account held by the Council or third party with support provided in line with the person’s wishes.
13. Direct payments are monetary payments made to individuals who ask for them to meet some or all their eligible care and support needs. The gateway to receiving a direct payment must always be through a request from the person.
14. Sections 14 and 17 of the Care Act 2014, and associated Regulations, provide the legal framework for charging for care and support. Councils must also take account of the Care and Support Statutory Guidance published by Government.
15. The framework explains there is an “upper capital threshold”, which is £23,250. Where someone has savings or other capital above that level, the Council cannot commission residential care services. But it still has the power to commission any other care needed (see paragraph 8.13 of the Care and Support Statutory Guidance). If it does so then it can charge the person receiving services the ‘full cost’ of their care and support.
16. Government guidance also says:

• “a local authority will be under a duty to meet a person’s eligible needs when requested to do so and their needs are to be met by care and support other than in a care home. However, where the person has resources above the financial limits the local authority may charge the person for the full cost of their care and support. In such circumstances, the person remains responsible for paying for the cost of their care and support, but the local authority takes on the responsibility for meeting those needs. This means that the local authority may for example provide or arrange care and support or make a direct payment which may be a paper based exercise, or some combination of these”. (paragraph 8.63 of the Care and Support Statutory Guidance)

The key facts

17. Mr Y is elderly, registered blind since birth and has a diagnosis of dementia. By May 2025, the Council had provided him with care services for around 35 years. He had received a direct payment since 2016. He used this to pay for personal assistants to meet his care and support needs.
18. Mr Y received his direct payment through a ‘managed account’. The Council calculated a personal budget for what it cost to meet Mr Y’s care and support needs. It then calculated Mr Y’s contribution towards his care and support following a financial assessment. Both the Council and Mr Y then paid their respective contributions into the account. The Council provided an administration service helping Mr Y pay his personal assistants who invoiced for their services. It also arranged for matters such as tax payments and insurance costs. The service could also help Mr Y with recruiting personal assistants. Mr Y’s personal budget included an amount for the administration costs associated with using a managed account.
19. In October 2024 Mr X discovered Mr Y’s capital had gone above the upper threshold. He told the Council of this change in circumstances. He also told the Department of Work and Pensions (DWP) which took several months to recalculate Mr Y’s entitlement to pension credit. By May 2025 the DWP had completed its recalculation and the Council then undertook a fresh financial assessment. This confirmed Mr Y no longer had eligibility for support with his care costs from the Council.
20. The Council said it would therefore close Mr Y’s managed account as he was no longer eligible for financial support. Mr X said he and Mr Y had only around ten days to make alternative arrangements.
21. With the help of the Council’s direct payment team Mr X contacted a payroll company used by the Council in administering managed accounts. Mr X helped Mr Y set up a new account with the payroll company. That company provides the service the Council used to provide under the managed account arrangements. Mr Y pays a monthly fee to the payroll company for its services. He also incurs a one-off annual charge for insurance. Mr X says these costs mean Mr Y pays more for his care and support than the personal budget previously calculated by the Council.
22. Mr Y has continued to receive the same care as before the Council stopped him using its managed account. Mr X says one personal assistant has supported Mr Y for many years and understands his needs well. In particular, understanding that despite his disabilities Mr Y has a determination to remain as fully independent as possible which she supports him with. Mr X says under the current arrangement his personal assistant has taken on the responsibility to help arrange cover when she is on leave.

Mr X’s complaint

23. Mr X first complained to the Council in June 2025. He was unhappy the Council had forced Mr Y to begin self-funding his care. He said the Council should have allowed Mr Y to continue to use his managed account. Mr X said Mr Y could have become a full cost payer under this arrangement. He also complained that both he and Mr Y had only short notice of the Council’s decision.
24. The Council replied the same month. It said it “could have handled better” Mr Y’s financial assessment. In particular, it said that it should have discussed with Mr X and Mr Y if Mr Y needed the Council to arrange his care and support. But it said only “in a few limited circumstances” could it continue to arrange care for someone with capital above the upper threshold.
25. Dissatisfied with the Council’s response, Mr X escalated his complaint. He pointed to passages in the Care Act 2014 and Care and Support Statutory Guidance in support of his view the Council could have let Mr Y keep his direct payment managed account.
26. In its final reply, sent in September 2025, the Council reiterated that it considered it could have handled events better, without being specific about how. It apologised “for any distress or confusion caused” and offered a symbolic payment of £250 in recognition of this, which Mr Y accepted. But the Council said that it could not say if Mr Y could retain a direct payment managed account following the increase in his capital. However, it implied the Council would look at the matter again. It said that its adult care service would write to Mr X, “with an outcome of its decision concerning the application of its use of discretion in cases such as [Mr Y’s]”.
27. Mr X told us in April 2026 that following this letter from the Council it had not contacted him again about this matter.
28. Mr X told us that he had concerns that while Mr Y remained as independent as he could, he had limited support, relying heavily on Mr X and his personal assistant. Because the Council no longer monitored Mr Y’s care and support, Mr X had concern for the implications, if he no longer support Mr Y. He also said the current arrangement meant Mr Y was heavily reliant on his personal assistant. He explained Mr Y had not wanted to accept a commissioned service from the Council as he did not want to lose the services of his personal assistant, who had supported him for many years.

My findings

29. I note that before May 2025, the direct payment arrangement the Council had with Mr Y involved it in doing more than giving him his personal budget to commission his own care. While Mr Y received a direct payment, neither he nor any third party on his behalf, undertook the necessary administration associated with employing his personal assistants. Instead, he relied on the Council and / or the bookkeeping company it partnered with, to provide the necessary payroll and other administrative services. The first question I have considered is whether the Council had an obligation to cancel these administrative arrangements because Mr Y’s capital increased above the upper threshold.
30. I do not find the law and guidance summarised above directly addresses this set of circumstances. However, they explain that when the Council commissions care, and the capital of the person receiving care goes above the upper threshold, it must continue commissioning care if the person asks it to. The person receiving care will become a full-cost payer, paying for all their care in line with the personal budget set for its cost. I consider law and guidance make a clear distinction therefore between the question of deciding who is eligible to receive care services, and the question of charging for those services.
31. As a result, I find the Council was not under any obligation to close Mr Y’s managed account when it learnt his capital had gone above the upper threshold. Nor should it have taken any steps to do so, without first considering if it remained under a duty to meet Mr Y’s eligible needs following his change in circumstances.
32. It is not clear to me the Council did this. Both Mr X’s complaint, and the Council’s replies to the same, do not indicate that it did. There is some suggestion in the complaint responses, and from what Mr X has told me, the Council suggested it could move Mr Y’s care on to commissioned basis. But I understand this was only after Mr X raised concerns. So, I find the Council was at fault for not considering if Mr Y had a continued eligibility to receive care and support after it learnt of his increase in capital in May 2025.
33. It does not follow that because someone has eligibility for care and support, they necessarily have entitlement to a direct payment arrangement. However, the law and guidance place a strong presumption that most recipients of care and support should be able to receive such payments. The qualification criteria rest on considerations about the person’s capacity and ability to manage such a payment (with support if need be). They operate separately from any considerations about charging.
34. So, I find there is no barrier on the Council operating a managed direct payment account if someone with such an arrangement has capital that exceeds the upper threshold. There is support for this finding in the Care and Support Statutory Guidance which refers to the possibility of a local authority maintaining a direct payment as a “paper based exercise”. While the guidance does not say exactly what it means by this phrase I think it assumes a situation similar to Mr Y’s. In other words, that councils can maintain managed accounts where all the deposited funds are from the person receiving care as a full cost payer.
35. I recognise the guidance also refers to this only as an “example” of how a local authority might meet need, implying it can do so in various ways. I have considered if this still leaves open the possibility that a council could switch providing care from a direct payment managed account to a commissioned service instead.
36. But such an approach appears incompatible with the overriding principles set out in the statutory guidance. These stress that care planning should involve the person receiving care and that local authorities have to give weight to their wishes. Further, that guidance covering direct payments also says councils should only withdraw this choice in limited circumstances. For example, where someone has misspent direct payment funds on something other than on meeting their care needs.
37. I also consider that for the Council to justify offering only a commissioned service to someone in Mr Y’s circumstances, it would need to consider the facts specific to their case. For example, it might be relevant for the Council to consider how long a person’s capital will exceed the upper limit; is it temporary or a long-term scenario. The Council may also need to consider the individual’s potential vulnerability. If the Council steps away from all care and support planning then it may lose all contact with someone whose needs may increase over time.
38. There is no record the Council undertook such consideration in this case. It did not consider allowing Mr Y to keep his managed account with the clear benefits that bought him. It fettered its discretion and that was a fault.
39. Next, I have gone on to consider the consequences of that fault. As set out above I find the Council at fault for not asking itself first in May 2025, if it still had a duty to meet Mr Y’s care needs. I consider the answer to that question would have been ‘yes’.
40. Second, it then needed to consider how it would meet those needs. I consider it follows from what I have said above that on balance it would have come to the view that it could still do that through a managed direct payment account. The Council would no longer contribute to that account and Mr Y would contribute the full sum of his calculated personal budget. My understanding is that this would include the administration costs of running that managed budget.
41. By not offering that choice I consider the Council caused unnecessary distress at the beginning of the events caused by this complaint. It also required Mr Y to enter an alternative arrangement to manage his care. I note that Mr X and Mr Y successfully negotiated that handover, and Mr X credits the direct payment service within the Council for its support in enabling this.
42. But even so, this new arrangement is less advantageous to Mr Y. It costs him more overall than the previously calculated personal budget and runs the risk of his care and support needs becoming less visible to the Council. So, I find both the distress caused to Mr Y and that he finds himself in this less advantageous position is an injustice to him, resulting from the Council’s fault.
43. In considering how the Council should remedy this injustice, I recognise its complaint responses said it could have managed Mr Y’s change in circumstances better. I have taken this to mean the Council accepts it gave Mr X and Mr Y little time to make changes to Mr Y’s care arrangements and it communicated its position poorly. I consider the symbolic payment it made, a proportionate remedy for this distress.
44. But what the Council has not done is remedy the injustice arising from the underlying fault in its decision. Its complaint response implied it would ‘look again’ at the decision to end Mr Y’s access to a managed account, but it did not then go on to do so.

Back to top

Agreed Action

45. The Council has accepted the findings set out above. It has agreed that within three months of this decision, it will:
1. apologise to Mr X and Mr Y accepting the findings of this investigation. We publish guidance on remedies which sets out our expectations for how organisations should apologise effectively to remedy injustice. The Council will consider this guidance in making the apology recommended;
2. arrange for Mr Y to have a direct payment managed account as he had before June 2025. It will treat him as a full cost payer for as long as his capital remains above the upper threshold;
3. recompense Mr Y for any additional costs he has incurred for his care and support since June 2025, including any administration costs. It will do this by obtaining detail of the costs he has incurred using the self-funding arrangement. It will then compare these with what he would have paid had the Council maintained the managed account and treated him as a full cost payer. It will pay any difference between the two if that is in Mr Y’s favour.
46. I recommended three months for this action to complete for the following reasons. First, I understood nothing had likely changed in Mr Y’s underlying care and support needs since June 2025. Mr X confirmed to me Mr Y received the same hours of care and support, from the same personal assistants, as that received before. However, around 12 months have passed since the events covered by this complaint. So, I considered it reasonable the Council may need to reassess Mr Y’s care and support needs. In the event I understand a reassessment began before I completed this investigation. I hope this means the Council can complete the steps set out in paragraph 45 before the three-month deadline.
47. Second, in making the calculation at point c) above, I thought the Council may need to take account of inflationary costs impacting both what it would have cost Mr Y had the managed account continued and the costs he incurred. I considered it could take some time therefore for both parties to complete discussion and agree figures before the Council could complete this action.
48. In addition to this personal remedy for Mr Y, the Council has agreed to make a service improvement that may benefit others who may find themselves in Mr Y’s position. The Council told me it was currently undertaking a general review of its direct payment policy and procedures, which would complete within six months. As part of that review, it agreed it would:
1. set up an arrangement to enable those who receive direct payments via a managed account, to continue to use such an account on a full cost basis if their capital went above the upper threshold;
2. produce written guidance for all relevant staff who complete financial assessments and operate direct payment managed accounts, as well as to the public, to complement the arrangement described at point a) above.
49. I noted that while agreeing to these actions the Council said it did not consider it had a “legal duty” to offer a managed payment account service when providing direct payments. But that it would consider individual circumstances in all cases similar to Mr Y’s in the future. In other words that it accepted it had a discretion to provide such a service and that it would not fetter its discretion. I considered this acceptable, noting that it was not my role to provide definitive advice on the extent of the Council’s duties in this area.
50. I agreed the Council would have six months to complete the actions at paragraph 48 in line with the timeframe for its overall direct payment policy review to complete.
51. The Council has agreed to provide us with evidence when it has complied with the actions set out in paragraphs 45 and 48.

Back to top

Final Decision

52. For reasons set out above I upheld this complaint finding fault by the Council caused injustice to Mr Y. The Council agreed to take action that I considered would remedy his injustice and improve its service for others. I therefore completed my investigation satisfied with its response.

Back to top

Investigator's decision on behalf of the Ombudsman