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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.

Are you over 55 and a homeowner who is looking to top-up their pension income? Maybe you need some cash so that you can pack your bags and take the sunny holiday you have been dreaming about, or perhaps you are looking to redecorate and make some home improvements.

A lifetime mortgage is becoming an increasingly popular option for individuals within your age demographic who have similar aspirations for their retirement.

Grandad thinking about inheritance as he spends time with his grandchild

So, how exactly does a Lifetime Mortgage work?

A lifetime mortgage is a loan secured against your home. You will retain full ownership of your home and the loan plus the roll up of interest will only need to be repaid when you pass away or enter long-term care.

A major sticking point for many people considering a lifetime mortgage is the thought of not being able to leave any inheritance for your loved ones. However, this isn’t always the case. Many lifetime mortgage products give you the option of choosing an Inheritance Protection Guarantee.

What is an Inheritance Protection Guarantee?

Opting for a lifetime mortgage with an inheritance protection guarantee means that you are able to protect part of the value of your home so that you can leave this behind for your loved ones. Many people choose this option if they would like to gift money to one person and protect the same amount for other friends or relatives, or if they think they would like to apply for additional borrowing at a later stage.

For example, if you have £50,000 available to release from your property, but want to ensure that your grandchildren have an inheritance, you could opt to take £30,000 and leave 40% of your home’s future value protected.

This will be given to your loved ones after you pass away and when the house is sold, irrespective of how much is outstanding on the loan.

The amount protected will still be covered by the No Negative Equity guarantee.

Grandma spending time with granddaughter in house

Are there any drawbacks?

Choosing an inheritance protection guarantee will reduce the amount you’ll be able to borrow, so it will depend on how much cash you want to release from your property. Also, it’s important to consider that if you do choose to release additional funds from your property in the future, this will reduce the amount of inheritance you can guarantee.

If your house decreases in value, the amount of inheritance protected will also decrease.

In some cases, selecting inheritance protection can increase the interest rate on your lifetime mortgage.

How can North East Equity Release help?

Our advisors can tailor your lifetime mortgage to ensure that it is suitable for your current and future wants and needs. We encourage family members and beneficiaries to be present for all meetings to ensure that the future of everyone involved is carefully considered.

We’re here to support you every step of the way. Call us on 0191 695 9493 for FREE advice on lifetime mortgages.