Will Equity Release affect my state pension?
One of the major concerns people often have when considering equity release is how it might impact their state pension.
As equity release becomes an increasingly popular choice for over 55’s looking to unlock the value tied up in their homes, understanding the potential effect on your state pension is crucial if you are thinking about taking this step.
So, in today’s blog post, we would like to explore the relationship between equity release and state pensions, in order to create a clearer picture around this matter.
What is equity release?
Equity release is the term used that allows homeowners aged 55 or above to access the equity built up in their properties.
This type of loan has become increasingly popular over the years and in essence involves taking out a lifetime mortgage.
Borrowers can release anywhere from £10 000 up to over 50% of their property’s value which provides an option that can be particularly attractive for retirees looking to supplement their retirement income or meet unforeseen expenses.
How does equity release impact state pension?
It is no secret that in the current economic climate, many individuals who are approaching retirement may be incredibly concerned that they will not be able to support and sustain themselves solely through their state pension.
For those in such a position, equity release provides an attractive alternative to financial insecurity and the chance to enjoy a richer, more relaxing retirement…
However, many individuals are rightly concerned that equity release may impact their state pension.
The good news is that equity release does not affect your state pension entitlement.
State pension is a separate benefit provided by the government based entirely on your national insurance contributions throughout your working life. Therefore, the amount you receive from your state pension remains unaffected by releasing equity from your home.
What about means-tested benefits?
While your state pension remains intact, it is important to consider the potential impact of equity release on means-tested benefits.
Means-tested benefits, such as pension credit or council tax support do take into consideration your income and capital. Releasing equity from your property could increase your capital and take your savings over a threshold which might affect your eligibility for certain means-tested benefits.
How can a professional adviser help?
Whilst equity release does not directly affect your state pension, it is important to be aware of the potential repercussions involved for means-tested benefits. Seeking professional, trustworthy advice will enable you to fully understand the specific implications equity release entails, based on your own unique circumstances.
Here at North East Equity Release, we have helped countless individuals and couples to make the right choice in line with their specific needs when it comes to equity release, offering impartial advice based on knowledge and experience when it is most needed.
Are you considering equity release but are in need of professional help and advice that you can trust? Get in touch today.
