Homeowners taking out equity release plans could be better off as a result of recent legislative changes made by the Government to rules concerning the payment of benefits, says SHIP.
The equity release industry trade body SHIP (Safe Home Income Plans) has praised recent modification to the rules, which could lessen the impact that equity release has on income related benefits.
When homeowners unlock cash from their home, this can affect the amount of benefits they are entitled to, but the changes mean that those 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," said Andrea Rozario, director general of SHIP.
The changes to benefit rules include clarifying the position of equity release in relation to Support of Mortgage Interest, which is intended to help consumers who receive one of a selection of Social Security benefits by providing help towards the cost of interest on any existing mortgage or certain other loans they have.
Following this clarification of benefit rules, SHIP says that homeowners who take out lifetime mortgages, including repayment of the original loan, then they may be able to continue to receive Support of Mortgage Interest on current interest payments on the part of their new equity release plan that cover the original debt.
The Government has also changed the rules on the application of an Assessed Income Period, within Pension Credits for those aged 80 or older. Since the rules changed in April this year, the Government no longer reviews retirement income and assets every five years, and customers no longer need to report any changes which occur to either of these. This means that those aged 75 and older could benefit from this change, SHIP said.
Additionally, from this month, the capital threshold in Pension Credit and pension age Housing Benefit and Council Tax Benefit has been raised to £10,000, so pensioners can hold up to £10,000 in savings without it affecting their entitlement to benefits. Consequently, if a homeowner takes out an equity release plan overall their savings remain below £10,000 then this will have no impact on their benefits.
"All these moves mean that over 65s may be able to make use of some or all of the equity in their properties to improve their standard of living in retirement without seeing their benefit payments drop or cease all together," Ms Rozario said. "We applaud these moves and call on all stakeholders to work together to ensure that consumers understand how equity release and benefits interact."
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