News

Aug 25

Equity Release Doesn’t Have to Affect Means Tested Benefits!

By Geoff Charles

Anyone considering releasing cash from their property to fund home improvements, offer financial help to friends or family or meet daily living needs — or anything else for that matter — may find themselves facing the worry of losing their means tested benefits. However, there is good news that is set to quash this concern.

It is true that things like pension credits and council tax benefits can be affected by taking out an equity release plan. However, providing homeowners take independent financial advice, they can be assured they will be properly guided to meet their overall objective of improving their cash flow and financial situation, with their very best interests kept intact.

The biggest problem usually lies where homeowners take out an equity release plan that involves a large lump sum which they keep in their bank accounts without having any specific plans to spend it. This can certainly have an effect on Pension Savings Credit. However, a specialist equity release adviser that offers independent financial advice would immediately suggest an alternative plan that could avoid this issue and yet still provide an income for the homeowner.

Certain Equity Release Schemes Leave Benefits Intact

There are equity release schemes available that allow a lower initial cash lump sum to be taken at the start and then continue to provide a cash reserve facility that allows smaller sums to be taken if and when needed. These schemes, called ‘drawdown equity release plans’, could leave any benefits intact by keeping homeowners within the benefit limits.

With a drawdown equity release plan, any initial funds released that are fully consumed can be topped up by a further drawdown from the equity release scheme, again to the extent that benefits are not affected.

Homeowners MUST take independent financial advice

It is important to reiterate the need for homeowners to take independent financial advice when considering equity release. This advice must be taken from a Financial Services Authority (FSA) regulated independent equity release adviser who will thoroughly investigate the situation and provide a comprehensive financial planning report on any recommendation, including alternatives to equity release. The adviser should also only recommend Safe Home Income Plans (SHIP) endorsed equity release plans.

Bower Retirement Services is an FSA regulated independent financial advice company that offers specialist advice on equity release throughout the south of England. For more information e-mail info@brsequity.co.uk or call 0800 4118668. Bower Retirement Services offers a free, no obligation initial consultation to homeowners considering Equity Release.