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Posts Tagged ‘Means Tested Benefits’

Can an Equity Release Adviser Provide Advice on Means Tested State Benefits?

Wednesday, December 18th, 2013

Claiming council tax benefits & pension creditDuring 13 years of giving equity  release advice, one of the first questions I ask new clients is whether they receive any means tested benefits or not. It’s a crucial part of the advice process as a professional adviser needs to check what impact, if any, equity release might have on vital state benefits that they receive.

 

It’s also really important to find out the exact income of every client to check for potential means tested benefit entitlement. I’ve interviewed equity release clients who didn’t even realise their entitlement and thereafter have subsequently made a successful claim which has led to extra available income.

 

How do I check to see if I’m eligible for benefits?

I would strongly recommend anyone who is about to retire, or is already retired, call the pension credit Freephone number to check for eligibility on 0800 991234 to get their situation individually assessed.  You can also click on the attached link: https://www.gov.uk/pension-credit-calculator to check your eligibility online.

 

Similarly, you should also call your local council tax benefit enquiry helpline number to check for council tax benefit. The telephone number will be on your last annual statement. Usually, if you qualify for pension credit you should also be able to get a reduction of some or all of your council tax benefit.

 

As a part of my recommendation process, I would fully assess your financial situation which would also include reviewing your means tested benefits during our meetings. As the initial consultation is free, I place no financial burden on you, so use my experience to the maximum & see if there are further entitlements you could claim.

 

Qualification rules and how much benefit can I receive? 

The earliest age you can qualify for pension credit was aged 60, but this is gradually increasing to age 66 from 2020. For tax year 2013/2014 pension credit should be available if a single person’s income is less than £145.40 per week, or £222.05 for a married couple. Your savings can also impact your eligibility for pension credit and council tax benefit but the relevant agencies do ignore the first £10,000 of savings that you hold. Savings between £10,000 and £16,000 can still mean that you receive some benefits but savings in excess of £16,000 normally mean you’re not entitled to any benefits.

 

From age 65 you may also be entitled to savings credit of up to £18.06 for single person and £22.89 for a married couple. You might be eligible for this as long as your income is less than £190 per week for a single person or £279 per week for a married couple.

 

Will I lose my benefits if I take a release of equity?

With advice from a skilled adviser at Equity Release Supermarket, you shouldn’t normally lose any benefits. If you’re already receiving means tested benefits and you’re thinking of equity release it’s best to have your situation analysed by finding a qualified equity release adviser. I also suggest that you contact the pension credit and council tax benefit helplines to discuss your situation. However, the rule of thumb is that if after releasing equity your savings are less than £10,000 your benefits shouldn’t be affected. Equity Release can be carefully planned to ensure that this this remains the case.

Let’s look at recent clients I’ve met and provided lifetime mortgage advice to:

 

Brian was aged 65 and his home was worth £200,000.  He wanted to release equity of £20,000 to buy a new car and bathroom but he was in receipt of pension credit and council tax benefit. As Brian was spending the money straight away there wasn’t any changes to his benefits, as he only kept his existing savings of £5,000 in the bank. He released £20,000 on the Aviva Lifestyle Flexi Plan and also had another £23,500 available in the reserve facility we created by recommending a drawdown equity release lifetime mortgage. Again, this money in his reserve doesn’t impact his benefits as it falls below the £10,000 limit imposed. He can thereafter take small amounts of at least £2,000 whenever it’s needed. This will mean that his savings are still kept below £10,000 and therefore not affect his benefits.

 

Terry & Margaret were both aged 67 and their home was worth £180,000. When they retired 2 years ago, Terry received a tax free lump sum from his pension which paid for a new car, a conservatory and they had a couple of holidays, but were left with less than £2,000 in the bank. They were in receipt of pension credit and council tax benefit. They could manage on their income but wanted funds to pay for a new kitchen costing £5,000 and wanted money for holidays over the next 10 years. Although they could release over a one off lump sum of around £50,000 from various equity release providers this would have proved catastrophic as they would have lost their entitlement to their much needed benefits. This is where careful planning by an equity release adviser can help. Instead they took out a drawdown lifetime mortgage with an initial loan of £10,000 to pay for their kitchen and for 2 holidays. They were also able to set up a reserve of capital of £41,000 with New Life and will be able to release regular withdrawals of at least £5,000 to fund their future holidays. This doesn’t have any affect on their benefits.

 

Additional lenders offering drawdown equity release schemes are Hodge Lifetime whom allow further withdrawals of £1,000, with Just Retirement, LV= and Aviva having a minimum of £2,000 cash reserve withdrawal limit.

 

Please remember that state benefits rules can change at any time. Special rules apply to making gifts with equity release. The benefit figures above relate to tax year 2013/14 & maybe subject to change.

 

How do I get more information on equity release and state benefits?

 

Whenever you consider equity release it’s important to get a fully authorised equity release adviser to carefully check your situation regarding means tested benefits, as well as checking overall suitability of the schemes.

 

Here at Equity Release Supermarket, we’re able to help you with this during our meetings. We do not charge for your initial consultation which can be conducted either in the comfort of your own home or over the telephone, to suit.

 

Please feel free to contact myself if you have any queries on equity release schemes and how they could affect your state benefits. My name is Mark Rumney & can be contacted on mobile 07957 974826 or email markrumney@equityreleasesupermarket.co.uk

Before Using Equity Release Club Together All Available Savings and Benefits

Thursday, June 27th, 2013

Experience has shown that equity release should always be considered a lifetime mortgage of last resort.

 

With the popularity of equity release schemes reaching an all time high, now is a good time to take stock of just why the equity release market has reached the level of consumer confidence it now commands.

 

There have been many highs & lows for an industry which has been much maligned. However, with increasingly flexible schemes & the lowest interest rates ever seen, we could be in for a ‘golden age’ for equity release.

 

It is therefore essential to seek the services of a qualified professional equity release adviser who is able to club together all their resources and ‘know how’ to complete a full fact find assessment of the clients situation.

 

This will include the ‘hard facts’ such as income, savings & assets etc which determine one’s current financial predicament. However, just as important are the ‘softer facts’ which mould a customer’s future viewpoint such as interest rates, property values and their potential inheritance.

 

Armed with this information, you should find an equity release adviser would assess whether a clients objectives could be met by alternative solutions, prior to an equity release recommendation being made.

 

Equity release alternatives  

When releasing equity from your home it involves a number of risks. Therefore, it is important that before your equity release adviser makes any recommendations, full consideration are given to whether there are any other options that could be explored.

 

Equity Release Supermarket will always discuss the following alternatives as a pre cursor to any equity release recommendation. Typically, these are:

 

  1. Apply for benefits – if your retirement income is below minimum government standards, then you may qualify for means tested benefits. These would include pension credit, savings credit and council tax benefit. For tax year 2013/14 the minimum income level to qualify for is £145.40pw for a single person and £222.05 for a couple. Therefore, if retirement incomes fall below these figures then you should be making enquiries at the DWP and your local authority. Remember that taking equity release from your property can affect means tested benefits, so always get professional advice.
  2. Obtain a grant for home improvements – again, if your income is below government guidelines then there are certain grants that are available upon enquiry. The standard grants can include loft insulation, cavity wall insulation, new boiler and by contacting your local Home Improvement Agency (HIA) they could provide assistance to help repair or even adapt your home. Therefore, these should always be explored before taking a home equity plan.
  3. Downsizing – i.e. moving to a smaller, less expensive property – probably the most common & cost effective solution, rather than taking equity from your property. Sometimes an emotive issue, as most retirees have lived in their current abode for many years, often with many memories attached. However, with the children moving on, your property may become too large to maintain. Therefore, by downsizing to a smaller property you can release equity that can then be used for the purposes you require & support you financially into your retirement.
  4. Using other assets to provide the funding required – taking equity release involves the expense of compound interest & an interest rate charged that would be higher than that received in most investments & savings accounts. Therefore, why take equity release, when you may have considerable savings you could use instead? Nevertheless, bear in mind some investments may be used for income purposes, so need to be left in situ & there should always be an emergency fund on hand should anything untoward occur & funds required immediately. Some people even feel the necessity for a large amount on deposit as they feel more secure knowing these funds are available. As an equity release adviser, we would explain the pros and cons of this course of action and maintain equilibrium for both parties.
  5. Ask for assistance from other family members – Equity Release Supermarket has experience of situations where brothers, sisters or even children have assisted their parents, rather than letting them take a release of equity form their property. This could be achieved by a family member taking a personal loan, remortgaging or even taking funds from their own personal savings. Lending to parents can have its drawbacks too, & we have seen occasions where this has created more family issues than it was meant to solve. However, with formal agreements in place if necessary, this can still be a good equity release alternative.
  6. Reduce your expenditure – with an increase in equity release lending being for debt consolidation purposes, many people have found the income transition from employment to retirement is a struggle. To maintain living standards in retirement, compared to employment is difficult for many & some never come to terms with this loss of income. By not cutting the cloth accordingly, debts amass on credit cards & loans & the downward spiral begins. By planning ahead before retirement & then analysing where cutbacks could occur once retirement starts, can have a significant influence on future retirement finances.
  7. Take in a lodger – one suggestion that always raises a smile, but in theory for many could help bring in extra income. The government ‘rent a room’ scheme allows home owners to let out a furnished room and receive upto £4,250pa in gross receipts without liability to income tax. For many however, sharing their main residence with other people may not sit too comfortably, however for individuals with room to spare it could create a good tax free income. Remember to check with your home insurance company & any lease that may exist on the property to ensure it does not create any exemptions.
  8. Consider other types of loans – credit card, personal loan, mortgage, HP – depending on affordability & the duration of the lump sum required, there are shorter term loan options available than equity release. A personal loan or strict use of a credit card and using some of the 0% credit offers available could prove to be extremely costs effective. The lifetime nature of equity release schemes means that if they are paid off early, there could be considerable early repayment charges levied by the provider.  Beware of high APR’s on loans and credit cards & bear in mind potential rate changes that could occur in the future should interest rates rise again.

 

As you can see before taking equity release club together all the ideas above and assess whether any of the aforementioned financial solutions could help yourself and/or beneficiaries over time. Equity Release Supermarket always suggest speaking to your children in any case to allay issues over inheritance.

 

To discuss how your equity release club of measures could help, contact the Equity Release Supermarket team of advisers on 0800 678 5159 or email mark@equityreleasesupermarket.co.uk

When Equity Release is NOT Right For You!

Sunday, December 30th, 2012

This article looks at why a release of equity from your home may NOT be in your best interests, after all Equity Release Supermarket is an impartial website and we only want what is best for our customers. Whether that is to proceed, delay and consider the alternatives or to dismiss outright, we will always provide you with a decision that is in YOUR best interests.

 

Equity release schemes are becoming a popular solution for homeowners aged over 55 who want to raise cash without having to sell their property. Although the safeties of equity release schemes are now assured by regulation, the decision to take equity from your property may still not be in your best interests.

 

Start of the equity release planning process

While there are different types of equity release schemes such as Lifetime Mortgages, Home Reversion and Interest Only Lifetime Mortgages, essentially they all act as a vehicle to release some of the equity that is built into your property, and you only need to repay it only once the house is eventually sold.

 

This is all well and good, however you should never shoe horn an equity release plan to fit your personal needs. In fact the opposite should be the case. Any equity release plan should be designed to meet your own personal goals & circumstances. If they don’t, then look towards the alternatives.

 

The fact that you are considering releasing equity means you have a need for financial planning and require funds to meet your monetary objectives. There is nothing wrong with that. Throughout our adult lives, circumstances will dictate that some form of finance will be required, whether it’s a mortgage, loan, overdraft or the credit card. As long as the finance selected was the right product for the right reasons, then it should prove the correct decision to make.

 

This premise remains the same even throughout retirement. The needs of the baby boomer generation are now proving more expansive than previous retired generations. With long term health improving & the over 60’s having a more active lifestyle, retirees have a flavour of living a more care free life and fulfilling their ambitions and dreams. However, jumping to the conclusion that an equity release loan is the only answer, may prove to be a mistake.

 

When should equity release be a ‘NO’

For every reason why one should take a release of equity, there are as many reasons also why not to.  Here we look at the reasons and alternatives why you should think twice about taking out an equity release mortgage, be it a home reversion or one of the many lifetime mortgages.

 

1.      Age – equity release schemes are not available until the youngest homeowner is 55 years attained. There are instances whereby one person may 55+ and their partner is younger. Under these circumstances it is still possible to take a lifetime mortgage only, however this should really be only under exceptional circumstances such as poor health or the management of serious debt issues (maybe to avoid bankruptcy or house repossession). The age factor is an important principle behind one of the negative issues surrounding the equity release loan – compounding of the interest. Remember, the younger you are when releasing equity from your property, the more time the capital has to compound on a yearly basis.

 

The consequential effect of a longer term is that the final balance will be larger; resulting in more of the proceeds from the eventual sale of the property needing to be paid back to the lender. Bear in mind this will not be paid back by you, you won’t be around, unless the lifetime mortgage is being repaid due to moving into a residential care home! It will effectively be paid back by your children/beneficiaries.

 

NOTE -the resultant effect of a longer compounding interest charging period is that the final balance being much higher and a correspondingly much lower inheritance for your children/beneficiaries. If this is something that concerns you, request an equity release quote and see what the potential balance could be in the future. Making certain assumptions on future property values and your anticipated life expectancy would provide an estimate of how much equity could be left, if any at all. Should this be prohibitive, then a solution, if right for your circumstances would be to delay you decision for a few years until such a time the roll-up effect hasn’t as greater an effect.

 

2.      Consider possible alternatives – equity release should really be considered a ‘last resort’ once all the alternative forms of finance have been eliminated. The reason for this statement is due to the long term cost of these schemes, whereas some of the alternatives, if affordable could be more reasonable and favourable for your children or beneficiaries. As part of the Equity Release Supermarket advice service all our advisers will consider whether any alternative forms of raising finance would be better for you. These could include the following: –

 

  • Interest only or interest only lifetime mortgage – if you can comfortably afford to make repayments during retirement then look at such schemes. Interest only or interest only lifetime mortgages would be better for your children as there is NO compounding of interest. The balance would remain the same throughout the term as when the mortgage started. Therefore, the final balance will be known in advance and any inheritance can be ascertained using assumptions on future property prices. With the minimum equity release loan available being £10,000, alternative loan types maybe better. Could a personal loan or credit card be used to service the debt? Certainly options to consider that would also clear the debt, rather than it increasing like an equity release loan.

 

 

  • Downsizing – dependent upon the size of your current property and its uses, then moving to a smaller property could be a solution. By downsizing to a lower valued property would raise money that could then fund your financial objectives. If nothing else, it could delay the decision to take equity release for many years. This is an important decision and not to be taken lightly. There are costs involved in moving house – stamp duty, legal fees etc and there will undoubtedly be improvements you wish to make to your new property which will also include additional costs. Moving to a new area will also mean new neighbours, facilities such as shops, doctors etc should always be considered as part of the downsizing process.
  • Check for means tested benefits – Before taking any form of additional finance in retirement, it would be prudent to check whether you have any entitlement to means tested benefits. This could include state benefits such as pension credit, savings credit or even council tax benefit. Therefore, always check with the Pensions Office or your local council to establish whether you could claim further income for the state. This would only relate to lower income issues and should your income fall below the thresholds set by the authorities then you may have some entitlement. Having this extra income may solve or temporarily solve the need for equity release. If you are entitled to means tested benefits it would also be sensible to check whether any home improvement grants are available on your property. This could be even if you are planning home improvements or not. You may be eligible for loft insulation, cavity wall insulation or boiler replacement under some local authorities.
    NOTE – if you still pursue a release of equity and you are drawing state benefits, the equity release lump sum could result in a partial or total reduction in means tested benefits. If you wish to check your eligibility for means tested benefits you can check with you local equity release adviser on 0800 678 5159.
  • Use existing savings/family bequests – if you have savings or investments that are not used for income purposes then you should consider using these funds before taking equity from your property. Bear in mind that taking equity from your property and merely leaving it languishing in a bank account is not best advice. In today’s interest rate world you will not receive a better interest rate on a bank account than the interest being charged on an equity release scheme.  Therefore, use any savings or liquid investments first, but bear in mind that an emergency fund of upto £10,000 is also prudent to have for that rainy day. This decision is always down to the individual as some clients feel more comfortable leaving greater sums on deposit, just in case. There is also no shame in asking family members for financial support, particularly when the decision to take equity release may not be to their approval due to the effect on their inheritance! Should a family member wish to fund your loan then this may be more cost effective for them, but this could boil down to whether they are happy tying up these monies longer term when they may have their own family needs in the near future.

 

Evidently, there are many factors and solutions that can affect the eventual decision as to whether equity release is right for you. For that reason it is imperative to speak to a financial adviser who is trained & qualified in equity release solutions.

 

To speak to your local equity release adviser click here or call Freephone 0800 678 5159 where independent advice is available.

 

On Why Finding A Good Equity Release Consultant Is A Must

Wednesday, June 22nd, 2011

The amount of equity you own is the term used to describe the value of a home less any mortgage or secured pending on it. Equity release allows you to free up this money tied up within your home.

 

The equity release process will allow you to receive a tax free, lump sum of capital allowing you to spend it in whatever way that you choose.

 

An obvious disadvantage is that you will not be able to hand down all of your property to your offspring. Nevertheless, you do get to live out the remainder of your life in your home, rent free or till you move into elderly care.

 

If you are considering an equity release scheme, the best way to get started would be to approach an expert. Some organisations which provide equity release schemes also provide a free consultation, so remember to take advantage of their services. Some research of the advisor would be of benefit as they must be regulated by the FSA (Financial Services Authority) & have an individual registration number with them. The equity release adviser should therefore be found on the FSA website register.

 

Ensure they are independent, which means they are free to deal with ANY equity release provider in the market. So ask. Some companies purport to be whole of market, however upon closer analysis they only deal with a handful of companies. You may therefore be missing out on a beneficial feature of an equity release scheme that they do not have available. This could save you £1000’s in the long run & could prove costly if the wrong equity release plan was chosen.

 

Your advisor will let you in on all the vital details regarding the procedure. This will be after the equity release adviser has collated all the necessary facts regarding one’s current situation. Guarded with this information, & any soft facts provided such as ‘how important is that you leave part or all of your property to your beneficiaries?’  will be asked. Also income & whether you are in receipt of means tested benefits is important as this will reflect on which equity release schemes are advised upon. The equity release consultant can then document & record this stage of the lifetime mortgage process.
Once an accurate financial picture has been ascertained & observed the clients objectives, the equity release adviser can then discuss the mortgage options available. These would include an explanation of the various schemes available to suit. Included in this would be roll-up equity release schemes, home reversion plans & interest only lifetime mortgages such as the Halifax Retirement Home Plan or the Stonehaven Interest Select.

 

You do not have to give them an instant decision; after all, going for an equity release scheme is a big decision and something which should not be rushed into.

Upon presentation of the equity release advisers recommendations a Key Facts Illustration must be offered to you. This would include a summary of the scheme in principle, costs & charges, future balance & the commission payable by the lifetime mortgage providers. This is quite a comprehensive overview of the scheme & covers the finer details, as well as the main features, such as the no negative equity guarantee & early repayment charges etc.

 

Once you have made your decision, all you have to do is simply call your advisor and give them the go ahead. They will have all your paperwork taken care of, contact your solicitor and keep you updated about everything, right to the time that you get your money released.

 

A professional & courteous adviser will confirm the funds have been released & offer any after care service in the future; for example when additional funds are required such as on a drawdown equity release scheme.

 

As a company Equity Release Supermarket keep contact with its clients to advise on new products & interest rates in the future as it is important to keep abreast of the market as & when more competitive products become available.

 

Independent & award winning equity release specialist Equity Release Supermarket offer all the above benefits & quality of service that the testimonials at the bottom of the home page illustrate.

 

To discuss your options in the release of equity from your property call freephone 0800 678 5159 today or alternatively complete our contact form & one of our advisers will be in touch

 

 
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