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Will equity release affect my benefits

The government will assess your entitlement to means-tested state benefits based on your capital, savings and income. Equity release is classed as a loan and as such exempt from means-tested benefits calculations, however, your benefits may still be affected by equity release.

Equity release will affect benefits if the income gained puts you above the benefits threshold. If equity is used to a pay loan or mortgage then it is not classed as income and will not affect benefit payments.

Pension Credit, Universal Credit and Council tax reduction may be affected by equity release, keep reading to find out if your benefit entitlement is affected by equity release. 

How are savings assessed for benefits?

When it comes to your savings, they will be assessed for benefits if you can access them with relative ease, or, if they’re financial products which can be sold on

When considering your capital, it’s valued at current market value (minus 10% if they’re costs involved in selling), and minus and debt secured on a property. If you own it with another person then you’re considered to have an equal share of ownership.

Savings included in means-tested benefits assessment Savings excluded in means-tested benefits assessment Other Exclusions in means-tested benefits calculations
Cash Loans or Grants used for home improvements Your possessions such as jewelry, furniture, or a car
Premium Bonds Money from insurance claims for up to six months if used to replace or repair. Business assets
Property you own, other than your main residence Money from insurance claims for up to six months if used to replace or repair. Any life insurance policy which has not been cashed in
Stocks and shares The value of a former home for up to 26 weeks if you have left because of a relationship breakdown. Or indefinitely if your former partner lives there as a lone parent. Any charge for currency conversion if your capital is not held in sterling
Income Bonds The value of a property for up to 26 weeks if you have acquired it to live there, you are trying to sell it, you are carrying out essential repairs or alterations to live there, or you are taking legal advice so that you can live there. Any Social Fund grant payments
National Savings accounts and certificates Arrears of certain state benefits
Money in tax-free children’s savings The value of a pre-paid funeral plan (for some working-age means-tested benefits)
Money in bank accounts, building society accounts

For more help and advice, get in touch through our equity release advice page

Which benefits are income assessed for means-tested benefits?

Council tax reduction benefit

Each local authority has its own rules and processes in place for entitlement to claim a council tax reduction.

When you’re being assessed and want to claim council tax reduction If you have more than £16,000 in savings you won’t be eligible.If you are claiming Guarantee Credit under Pension Credit you can have more than £16,000 in savings, and this can include a private or workplace pension.

If you are still working then local authorities can set their own limit for savings, but it is likely to be £16,000 or less.

Universal Credit

Having less than £6,000 in savings doesn’t affect your universal credit entitlement. Having more than £16,000 in savings will stop your eligibility to claim universal credit. Having savings between £6,001 and £16,000 will affect your Universal Credit claim.

Universal Credit has been brought in to replace the following benefits:

  1. Income-based Jobseeker’s Allowance
  2. Income-related Employment and Support Allowance
  3. Income Support
  4. Pension Credit
  5. Tax Credits (Child Tax Credit and Working Tax Credit)
  6. Housing Benefit
  7. Council Tax Support
  8. Social Fund (Sure Start Maternity Grant, Funeral Payment, Cold Weather Payment)

What is the effect of equity release on pension credit?

Your private and state pension is unaffected by equity release. Pension credit is an additional means-tested benefit that tops up the state benefit for those pensioners with low incomes. It has two parts:

  • Guarantee Credit
  • Savings Credit.

The guarantee credit component of pension credit, which supplements the statement pension, may be impacted. Pension Credit – Guarantee credit is used to top up the basic state pension from £125.95 to £163.

Your capital allowance is £10,000 before it affects your pension credit. However, for every £500 in savings, you will lose £1 per week in guarantee credit.

If you or your partner are 75 or older, you may be eligible for pension credit with an indefinite assessed income period (open-ended AIP).

For Further Information on Equity Release….

Equity Release Interest Rates

Equity Release Vs Remortgaging~

Does Equity & Credit Scores, Does it Matter?

Which benefits are not affected by equity release?

All benefits the do not need to be means testing are not affected by equity release, benefits such as:

  • Disability benefit – unaffected regardless of income and capital.
  • Personal Independence Payment (PIP) – is not affected by equity release

Care funding and Equity Release

If you have over £23,250 in capital, you must fund your own personal care. You can use equity release to borrow money to modify your home to suit your needs. This may help you stay longer at home. However, if you need long-term care or die, you must repay the equity release.

Small home modifications can be free – Your council may help pay for each improvement under £1,000. Other costs, such as a wet room or wider doors, may be covered by other sources.

Many charities offer grants. Independence at Home does just that! Visit their website at www.independenceathome.org.uk to learn more.

A Home Improvement Agency (HIA) can also help you find funding for adaptations. Visit www.findmyhia.org.uk/about to find a local HIA.

You can also check with your local council or HIA to see if they can help with urgent home improvements.

How can we help

We know equity release can be a big decision for you to make, which is why we’ve teamed up with the UK’s number one equity release adviser and member of the Equity Release Council, Age Partnership.

As our trusted Partner, the Age Partnership advisor will make sure you understand all the options available to you.

Equity release may involve a home reversion or a lifetime mortgage, which is secured against your property. To understand the features and risks, ask for a personalised illustration.

Equity release requires paying off any outstanding mortgage. Any money released, plus accrued interest would be repaid upon death, or moving into long-term care.’

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