Government Changes to Benefits has Positive Results for Equity Release
Retired homeowners will now be able to take out an equity release plan safe in the knowledge that it may not affect their benefit claims. This comes after the Government announced changes to the benefit assessment schemes.
These changes, which have been rolled out over the past nine months, will mean homeowners might not see their benefits entitlement affected should they proceed with an equity release plan. In the past, homeowners taking out an equity release plan could see the injection of cash from an equity release scheme affect their claims to benefits.
Equity Release Won’t Affect Savings Benefit
Perhaps the most encouraging change to the legislation has seen the capital threshold rise to £10,000 from £6,000 in Pension Credit and pension age Housing Benefit and Council Tax Benefit. This will mean that homeowners will be able to take out an equity release scheme and so long as it doesn’t increase savings beyond £10,000, their benefits claims won’t be affected.
The Government also moved to clarify the position of equity release and Support for Mortgage Interest (SMI). SMI is a contribution towards mortgage interest for homeowners who claim any social security benefits. Under the new legislation, any homeowners taking out an equity release scheme may not see their SMI contributions affected.
Equity Release Plans Won’t See Certain Benefits Reduce
These changes that could allow more homeowners to make the most of an equity release scheme have been supported by SHIP – the equity release industry body.
Andrea Rozario, director general of SHIP, expressed her joy at these changes. “Over the last nine months, the Government has announced changes that we believe will mean that those consumers who wish to take out an equity release plan can do so in the knowledge that they may not see certain benefits reduce or cease all together.
“Following clarification of the rules, we can confirm that if claimants take out a lifetime mortgage including repayment of the original loan, then they may be able to continue to receive SMI on current interest payments on the part of their new plan that covers the original loan.
“They have raised the capital threshold to £10,000 in Pension Credit and pension age Housing Benefit and Council Tax Benefit from November 2009 and changed the rules on the application of an Assessed Income Period rules (AIP) within Pension Credit for those aged 80 years old or over.”
Equity release schemes are a viable way to supplement income in retirement and also pay-off debt. Research by Age Partnership earlier in the year suggested that 46% of all equity release plans taken out were done so to clear debt.
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