It’s important to know all the facts before embarking on your equity release journey and one important one is how it will affect any benefits you receive.
Equity release may affect your eligibility when it comes to means-tested benefits. This is because the Government takes into account your capital and income (your ‘means’) when deciding on what you’re entitled to. As equity release unlocks cash from your home, it turns it into capital and this may have an impact on how much or even if you will receive means-tested benefits.
Benefits that do not require means testing, such as disability benefits or contributory benefits, would not be affected by equity release.
The main two benefits that could be affected are pension credit and council tax reduction.
Guarantee credit (pensions)
The state pension is not affected by equity release. However, the guarantee credit part of pension credit, which tops up the state pension, may be affected.
Guarantee credit tops up your basic state pension to a guaranteed minimum level (up to £163 for an individual)*. You are allowed £10,000 in capital (such as savings) before your pension credit is affected. After that, for every £500 in savings you have, you will lose £1 a week in Guarantee credit.
Council tax reduction
This is a benefit you can claim if you have less than £16,000 in capital, so equity release is something that could affect this.
Whether you claim benefits or not, it’s important to get advice when taking out an equity release plan. Key’s advisers use our unique software to find out which benefits, if any, might be affected by releasing cash from your home. Plus, by talking to an expert equity release adviser you’ll be able to find out whether it’s the right course of action for you.
*Correct as of September 2018
Points to consider:
The most popular type of equity release is a lifetime mortgage. A lifetime mortgage is secured against your home.
Equity release will reduce the value of your estate
Unless you decide to go ahead, Key’s service is completely free of charge, as our usual advice fee of 1.99% of the amount released would only be payable on completion of a plan, subject to a minimum advice fee of £1,499.
You may also be interested in Pension Annuity Calculator