Equity Release and State Benefits
More and more people are choosing to stay in their own homes and pay for home care as opposed to move to residential care when they get older. Many people in their 60’s are also fairly heavily in debt and need a way of raising money.
Equity release is becoming more and more popular and this will only increase over time as the NHS and social care sector continues to struggle due to over subcription and underfunding.
Equity release is a means of retaining the use of your house or another object which has capital value, while also obtaining a lump sum or a steady stream of income, using the value of the house. The “catch” is that the income-provider must be repaid at a later stage, usually when you die.
I was asked the other day how equity release funds affect state benefits, especially in the situation that the money has been raised on the property for the sole intention of converting it to suit ageing needs.
Equity release and State Benefits – where do you stand?
I have consulted with numerous experts in various benefit departments both within local councils and the DWP. This is the situation currently, regarding Equity release and state benefit entitlements.
Attendance allowance – unaffected by financial situation, currently assessed by need.
State Pension – unaffected.
Guaranteed Pension Credit – unaffected during fixed term. This is the first 5 years
This is the first 5 years after age of 65 when pension credit is awarded and there is currently no disclosure needed.
However, this is being abolished by the Government and the rule of thumb now is it is best to tell DWP of any changes. The pensions helpline number is 0345 606 0265.
Pension Savings Credit – would be affected temporarily, whilst funds are in the bank.
I was advised that in the case of wanting to use funds to modify your home to enable you to remain independent then, funds in the account would be disregarded provided they are spent in a reasonable timescale and for the stated purpose with receipts etc.
If the money is merely for a holiday or new car, it would be seen that you have additional income and benefits may be cut until you reached the £16,000 threshold again.
Council Tax benefit – If someone has over £16,000 then they would become liable to pay their full council tax liability. The benefit would stop and then be re-assessed.
Rule of thumb
If you are thinking of releasing money from your property by equity release and are in receipt of any other benefits not listed above, contact your local benefits office and discuss your plans with them.
I’m selling my home. Will this affect my benefits?
It might do, depending on which benefits you get. If you’re getting any means-tested benefits – where your eligibility is based on how much money you have – the value of your home isn’t counted if you’re living in it, but money you get from the sale of it would be. Pension Credit is a means-tested benefit. If you get Personal Independence Payment, Disability Living Allowance or Attendance Allowance, these won’t be affected.
It’s a good idea to seek advice before you sell your home if you’re in any doubt about how this will affect your income from benefits. Make sure you keep the office that pays your benefits informed of any change to your income, savings and circumstances, to avoid overpayment.
You can also call the Independent Age Helpline for advice (0800 319 6789).