Equity Release Loans And Benefits
In recent years, there has been an increase in the number of people taking out an equity release loan in order to help them fund their retirement. However, a new survey has found that the majority of these borrowers have no idea how taking out a loan will affect their entitlement to state benefits.
A survey conducted by the trade body SHIP (Safe Home Income Plans) has revealed that around 88 per cent of all borrowers who have released equity from their home through this type of loan, have little or no idea as to how the loan will impact on the benefits the, have little or no idea as to how the loan will impact on the benefits they already receive, or may be entitled to.
A number of state benefits for pensioners, as well as tax allowances, are means tested and taking out an equity release loan, either to raise a lump sum of money, or to provide additional income, could jeopardise a person’s ability to obtain certain benefits.
The survey also found that somewhere in the region of 50 per cent of all equity release loan customers were not receiving their full entitlement to state benefits and 42 per cent of loan customers could actually lose some of the benefits they already have, due to taking out an equity release loan.
The state benefit system in the UK is confusing for many people at the best of times and many people take out an equity release loan without ever considering what effect it could have on the benefits they receive.
Even many financial advisers admit that assessing a clients entitlement to benefits when taking out an equity release loan is confusing and as a result of this, SHIP are calling on the Government to produce clear and unambiguous guidelines on benefits, specifically for equity release loan customers.
