Giraffe Equity Release will always help our customers understand the ins and outs of equity release. This includes how it may affect your entitlement to mean-tested benefits.
Thousands of people have decided that equity release is right for them with a significant number securing a more financially stable future.
However, doing this when you get means-tested benefits could change what you’re entitled to, so it’s always important to find out what’s best for your unique situation.
Several benefits are means-tested and so it’s important to understand which may be affected.
What are means-tested benefits?
A means-tested benefit is a type of financial support of which your eligibility is decided once your income and capital (such as savings or investments) has been taken into consideration.
For example, Pension Credit is a means-tested benefit that could be affected by equity release, as whether you get it is based on your financial situation. Disability benefit wouldn’t be affected by equity release, however, as it’s a benefit paid regardless of income or capital.
Pension Credit and Council Tax Reduction are two common benefits which might be affected by equity release. Let’s see how that works.
To be completely clear, your State Pension would not be affected by any decision to take equity release.
However, the Pension Credit element of your State Pension might be. If you have reached state pension age, Pension Credit can top up your weekly income to £177.10 if you’re single or £270.30 if you have a partner.
If you have capital of less than £10,000, you can claim the full amount of Pension Credit. After that, for every additional £500 you have in your savings, you would lose £1 a week of your Pension Credit.
Council Tax Reduction
Much like Pension Credit, equity release could affect your eligibility to claim Council Tax Reduction. Depending on your local authority, you could be allowed up to £16,000 in capital before your Council Tax Reduction is affected.
While Pension Credit and Council Tax Reduction are two of the more common means-tested benefits, these might also be affected by taking out equity release:
Income Support, Jobseeker’s Allowance (where judged on income), Housing Benefit and Employment and Support Allowance (again, where judged on income).
For example, like Council Tax Reduction, if you claim Housing Benefit, you could lose it if you have savings or investments of £16,000 or more.
The good news
If you’re thinking about releasing equity from your home, it’s very important that you discuss your situation with an expert equity release adviser. Giraffe Equity Release will ensure you consider your options and discuss the implications of any decision you take, checking what benefits you are entitled to and which of those could be affected by equity release.
And if you decide to go ahead, you can spend the money in a variety of ways, whether it’s paying off existing debts, making home improvements or helping a loved one financially. Whatever you do decide to do, it won’t affect your eligibility to any benefits that aren’t means-tested, such as Winter Fuel Payment or free prescriptions if you’re over 60.
Things to consider
- The cash you release from your home is tax free
- With a lifetime mortgage, typically there are no monthly repayments to make as the loan plus roll-up interest is repaid when the plan comes to an end
- You should always think carefully before securing a loan against your home
- You always remain the owner of your home with a lifetime mortgage
- You can guarantee an inheritance with some lifetime mortgage plans
- Lifetime mortgage plans come with a no-negative equity guarantee, meaning you will never owe more than your home is worth
- Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits
- Giraffe Equity Release offer lifetime mortgages which is a loan secured against your home.
Releasing equity from your home may affect your entitlement, either now or in the future, to State Benefits. However, if you are in any doubt about your eligibility, you should seek clarification from the Department for Work and Pensions, your Benefits Agency or the Citizens Advice Bureau before proceeding to release funds from your home.
Figures are correct as of time of publication.