Would Equity Release Affect My State Benefits?
Yes, equity release can affect certain state benefits. Therefore, it is essential that before taking any home equity plan out, you receive specialist equity release advice to ensure you know exactly what effect the release could have. Additionally, contacting your local benefits office, citizens advice bureau or local authority would be recommended to confirm.
The reason for seeking benefits advice would be that not only could you check your existing entitlement, you could also ascertain whether there are further benefits you are currently missing out on. If so, this could mean that a release of equity could be delayed or even become a non-requirement as any extra unclaimed benefits could solve the current financial shortfall.
Only means tested benefits can be affected by taking a lifetime mortgage or home reversion plan. Those potentially affected benefits would include pension and savings credit, income support and council tax reduction (formerly council tax benefit). By speaking to a qualified adviser they can ensure that by taking equity release, tailored advice could result in existing benefits not being affected. For example use of the drawdown lifetime mortgage & taking cash in small tranches can keep savings within benefit thresholds.
If benefits are affected by equity release, it would be due to the fact that the savings limits for each benefit has been exceeded which results in a reduction in the benefit payment. For example pension credit in 2014 permits in a maximum savings limit is £10,000. For every £500 of savings over this limit, you would lose £1pw of pension credit. Again, similar principles, but different limits are applied to council tax reduction.