Check you are claiming what you are entitled to before turning to equity release
A new study claims more than half of the people seeking advice on equity release are among those failing to claim any or all of the state benefits they are entitled to.
While equity release is a popular way to raise cash for older homeowners, receiving benefits could mean an extra income without having to rely on the value of your home so soon - or at all in many cases.
The Department of Work and Pensions released figures showing that at around one-third (between 32-38%) of those entitled to Pension Credits - a means-tested top-up to the basic State pension for retired people - fail to claim. The total income lost is between £2 billion and £2.8 billion a year.
Pension Credit pays £142.70 for single pensioners and by £8.18 to £217.90 a week for couples. It also paves the way for other awards such as council tax benefit.
The DWP says that of those who fail to claim, nearly four in five (78%) are homeowners.
A new study by an equity release firm claims that on average older people that haven’t registered for benefits such as Pension Credit, are losing £872 a year, with the biggest loss being at a significant £8,766.
The Just Retirement research shows a growing trend for using property assets as a way to generate regular income for day to day living rather than for one off purchases, such as holidays or home improvements.
Older people on fixed incomes in particular have been badly hit by rising inflation and record low interest rates as well as poor returns on pensions thanks to low annuity rates.
Equity release is a popular way of raising extra cash for the over 50s. Such a scheme allows you to raise tax-free cash against the spare equity in your property while retaining the right to live there for the rest of your life.
Experts agree that before you think about equity release, your first stop should be to check you are claiming full benefits.
Many people have worked all their lives and have perhaps never claimed any benefits. They know about the state pension, but may imagine that because they own their own homes, often valued at more than the national average, they are not eligible for any further help from the state.
At a time when we face a severe income squeeze, now is the time to make sure you’re claiming money that is sitting in Treasury coffers.
You don’t have to navigate the complex benefits system on your own. There is help available from the likes of Citizens Advice Bureau, online at direct.gov.uk, or from a professional adviser.
While you are on the case, check if you have lost track of any old pensions using the tracing service on the Pension Service to find them.
You can also check if you have old savings accounts at www.unclaimedassets.co.uk.
If you are already claiming benefits then be sure to seek advice if you are considering taking out an equity release loan. Income derived from an equity release plan will be taken into account when calculating eligibility for benefits, meaning some people may no longer qualify for income support or council tax benefit. Make sure you calculate if the extra income received from equity release outweighs any potential loss.