Will Equity Release Affect my Benefits?
There are a number of means tested benefits that retired persons may be eligible. Means-testing reduces the value of the benefits should your income or savings exceed a certain limit. Releasing equity from your home may result in a breach of the threshold for means-testing, in which case the benefit(s) may reduce or be lost all together.
The benefits and thresholds are outlined below. Rates and thresholds may change or be affected by the state pension age. Before considering equity release you should obtain a detailed report of how releasing capital might effect any benefits that you qualify for, we can help you with this.
Pension Guarantee Credit
The Guarantee Credit works by topping up your weekly income to (tax year 2011/2012):
- £137.35 if you are single
- £209.70 if you have a partner
If you are aged 65 or over, living in Great Britain and have made some provision towards your retirement (such as savings or a second pension) then you may be entitled to Savings Credit. You may get the Savings Credit on its own or with the Guarantee Credit
If you have a partner, at least one of you must be 65 or over to get the Savings Credit.
The Savings Credit can be up to:
- £20.52 a week if you are single
- £27.09 a week if you have a partner
You may still get the Savings Credit even if the money you have coming in is up to about:
- £188 a week if you are single
- £277 a week if you have a partner
Both Pension Guarantee Credit and Savings Credit may be more if you are disabled, have caring responsibilities or certain housing costs, such as mortgage interest payments.
Age Related Personal Allowance
If your‘adjusted’ net income (click for explanation) is over £24,000 (the income limit for age-related allowances), your age-related Personal Allowance is reduced by half of the amount – £1 for every £2 – of income you have over the £24,000 limit, until the basic allowance is reached. So if, for example, you’re 66 and have income of £24,500 – £500 over the limit – your age-related Personal Allowance is reduced by £250 to £9,690.
Capital taken into account for means-testing
Most types of capital are taken into account for means-testing. This includes:
- money in bank or building society accounts, including current accounts that do not pay interest
- National Savings accounts and certificates (there are special rules for valuing these)
- income bonds
- stocks and shares
- property (other than your own home)
- Premium Bonds
- a share of any savings you own jointly with other people.
Some types of capital are ignored. This includes the value of the property you live in, if you own in, and any lump sum payments you received after deferring your State Pension.
There are two thresholds; £10,000 and £16,000
Income taken into account for means-testing
Some types of income are taken into account in full for means-tested benefits, but others, including Disability Living Allowance and Attendance Allowance. Other types of income are disregarded in part.