Certain State benefits are means tested and these could be affected if you choose to take equity out of your home.
The key benefits that may be affected are:
- Pension Credit
- Council Tax Support
- Health Benefits
There are two elements to Pension Credit:
- Guarantee Credit. This is normally payable if your weekly income is less than:
- £145.40 if you are single, or
- £222.05 if you are married (or live as a couple)
- Savings Credit. You may qualify for Savings Credit if your weekly income is over the ‘savings threshold’. The savings threshold is:
- £115.80 if you are single
- £183.90 if you are married or in a couple
If you are receiving or expecting to receive Pensions Credit, then boosting your income could reduce your entitlement to Pension Credit. Even if you don’t plan to use it to provide an income, but take a lump sum instead, this could still affect your entitlement if it takes your savings to more than £10,000 (or if they are already over this figure).
For more information on Pension Credit, click here.
Council Tax Support
From April 2013 Council Tax Benefit no longer exists in its current form as a nationally run benefit. Instead, it has been replaced with local schemes known as Council Tax Support. Each local authority in England has been given the freedom to design and administer their own scheme. The idea is that this will no longer be a type of benefit, but more a form of discount.
However, the regulations for Council Tax Benefit will continue to be set nationally for those who are of pension age. In this context ‘pension age’ means people who have reached the qualifying age for State pensions set for women (even for men). You can find out more about the increase in State Pension Age here.
Precise details of the scheme may vary and therefore if you are thinking of releasing equity from your home, and you believe you may be, or are, eligible for Council Tax Support, you should find out whether any additional income or savings you generate from releasing equity will impact your entitlement.
If you’re receiving Guarantee Credit, you will automatically receive Health Benefits.
Health Benefits include free prescriptions, sight tests, dental check ups and treatment and much more.
If you’re only receiving the Savings Credit part of Pension Credit, you may still qualify for Health Benefits if you have a ‘low’ income and savings of £16,000 or less.
If you do receive Guarantee Credit or if you are on a ‘low’ income, you could lose any Health Benefits if you take out an equity release plan.
For more information, click here.