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Equity release and 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.

Did you know that a fifth of equity release plans that are taken out are to cover the day-to-day cost of living? Using property wealth can help to supplement your income during the current cost of living crisis. If you’re retired and concerned about maintaining your current lifestyle or wish to support your children and grandchildren through this difficult time, then a lifetime mortgage could help you. But are there any drawbacks to doing this?

Senior man contemplating equity release in his home
Lifetime Mortgages are for life

Releasing equity by means of a lifetime mortgage is not a financial decision that should be taken lightly. Whilst current cost of living pressures can be a significant source of worry, it is important to consider the long-term implications of a lifetime mortgage. Hence the name, lifetime mortgages are a long-term product where a loan is secured against your home until you die or move into long-term care.

Lifetime mortgages charge compound interest

Lifetime mortgages charge compound interest, meaning that if you choose not to make monthly repayments, the amount you owe will roll up. This reduces the amount of equity left in your home and can eventually add up to the total value of your home. This can have an impact on the amount of inheritance that you can leave behind for your loved ones.

Interest rates are rising

With the Bank of England raising the base rate, interest rates are continuing to rise. Lifetime Mortgage interest rates currently start over 6.50%, which is considerably higher than the rates this time last year. There are a number of factors that can contribute to lifetime mortgage interest rates, including the requested LTV, your credit history and your age.

equity release interest rates


It is important to consider all your options and speak to a qualified equity release adviser. From taking out a retirement interest-only mortgage to remortgaging and exploring local authority grants, there are many options to consider before taking the plunge with a lifetime mortgage.

We have your best interests at heart. Get in touch with our friendly adviser, Joanne and arrange a consultation to discuss your requirements.

There are many reasons to use a local Equity Release Adviser, but don’t just take our word for it, see what our clients have to say!

“Joanne has assisted us twice in obtaining and then transferring our mortgage. She made the process hassle-free and clearly explained everything to us. She is very good at her job and we would highly recommend her services!”

image of toy house sitting on top of stacks of coins representing equity release

It can be overwhelming when you’re looking to make significant financial decisions later on in life, but North East Equity Release can help alleviate some of that stress and make the process easier to understand.

“She always makes sure she understands your situation, potential future changes which may need to be considered (i.e. moving home, extending etc) and gives thorough advice regarding all this.”

As a local North East Equity Release Adviser specialising in Lifetime Mortgages, Joanne Manghan has an in-depth understanding of the market and the common problems that homeowners in the region are facing.

Joanne is able to meet with you in person – in the comfort of your own home if required – at a time that suits you. She is more than happy for members of your family or trusted friends to be there for support whilst she listens to your concerns and discusses your financial options. Joanne is an independent adviser and will never try to sell you a product that is not right for you.

“Extremely helpful, thoughtful and knowledgeable. We benefited so much from Joanne and she really made a difficult time easier.”

Joanne has been in the financial services industry for over 30 years. She completes at least 40 hours of structured learning each year, regularly attends conferences and seminars and ensures that she is up-to-date with the latest products and lenders.

Joanne hopes that soon she can count you amongst her satisfied North East Equity Release clients. Contact Joanne today for a free, no-obligation financial consultation.

For older homeowners in need of a financial boost, Equity Release could provide the perfect solution to cash flow problems.

Also referred to as Retirement Mortgages, Later Life Mortgages and Lifetime Mortgages, these loans enable borrowers to tap into the cash that is tied up in their home. This can make it possible for homeowners to meet other financial obligations and necessities or enable greater financial freedom during retirement. Like any loan product, Equity Release can feel daunting. However, these types of loans are simply another type of mortgage.

To dispel some of the concerns and confusion around Equity Release loans, we’re here today to talk about the ins and outs of this type of mortgage to create a clearer picture of how equity release could help you.

Coins on a table in front of a model house

What exactly is Equity Release?

Equity release loans are just another mortgage product when it comes down to it, which is a loan secured against your property while allowing you to continue to retain 100% ownership of your home and provide you with access to a tax-free cash lump sum from your own wealth tied up in your home which you pay interest to a lender for the use of instead of realising the wealth by selling the property.

There are 4 key differences between a standard mortgage and an equity release lifetime mortgage:

1) How the level of borrowing is assessed.
A standard mortgage is assessed by your income and affordability, as you are contractually obliged to pay the capital and interest back each month. An equity release mortgage is based on your age (life expectancy) and the value of the property. In essence, the loan and any interest is usually repaid from the sale of the property at some point in the future.

2) The freedom to choose to make no monthly payments
With an equity release mortgage, you can choose to make no monthly payments and allow all of the monthly interest to roll up over time. Alternatively, you can service part or all of the monthly interest and/or even make capital repayments in order to preserve your equity and even reduce the outstanding loan

3) Transparent repayments

This is a profound difference between modern day equity release mortgages and historical mortgages that still carry understandable bad memories. In addition, unlike historical plans, these mortgages now offer fixed, transparent, and limited early repayment charges if the client wishes to repay the mortgage at any time.

4) The term of the mortgage
A standard mortgage has an end date (also known as the term) by which the loan must be repaid. An equity release mortgage has no term with the loan usually being repaid upon death, entering long-term care or sale of the property.

Ultimately, equity release loans open the possibility for homeowners to unlock their wealth tied up in their home by releasing a cash lump sum from their home’s value or ‘equity’. The equity of your home is simply the property’s value, minus any outstanding mortgage or other forms of lending that are secured on it.

What benefits can equity release bring?

Letter blocks which spell equity

The key attraction of Equity Release is that borrowers can raise capital whilst retaining one hundred percent home ownership.

For many, the main plus point of this is that it provides money that they can use to enjoy their retirement. After a lifetime of working and saving in order to raise kids, run vehicles and meet mortgage repayments, many retirees are looking to finally release some of their financial burdens during their long-awaited retirement. Dream holidays, new hobbies and home improvements are just a handful of the things that are made possible through this scheme.

Such loans may also greatly relieve the pressures caused by the current cost of living crisis in the United Kingdom, enabling older homeowners to cope with inflation whilst maintaining a comfortable standard of living.

Who is eligible?

Homeowners aged 55 and over and who own their own property are eligible candidates for an Equity Release Mortgage.

To take out this type of mortgage, however, you must be looking to release at least £10,000 in equity from your property.

The value of your home will, of course, also have an impact on the level of loan available to you.

What about interest, how does that work?

The interest rate is fixed for the lifetime of the loan and is based on the amount you borrow in relation to the value of your home.

As there are no contractual monthly repayments,(although you can choose to service the interest and make capital repayments if your wish) the interest accrued is rolled up for repayment when the home is sold.

A mortgage adviser who specialises in equity release products will be best positioned to advise you on the ins and outs of your interest.

Can I still leave an inheritance?

Of course, the main concern for many when it comes to equity release is inheritance. Like the majority of people, you probably wish to leave something behind for loved ones after your departure. If you’ve worked hard to pay off the mortgage on your property, it’s likely that you have always imagined that it would be the value of this property that was passed on as an inheritance to those you leave behind.

Of course, it is essential to recognise that your equity release loan will essentially decrease the amount that you can leave an inheritance to your loved ones. Thankfully, however, many Lifetime Mortgage products enable borrowers to protect a percentage of the value of their home through an Inheritance Protection Guarantee.

If you’re considering an Equity Release loan, it’s essential you seek advice and guidance that you can trust. That’s where North East Equity Release comes in. Simply contact us today to find out how we can help.