Boost given to home owners requiring £10,000 Equity Release - 01/11/09
We welcome the Government’s raising of the capital disregard level to £10,000 which is in line with many Lifetime Mortgage (equity release) drawdown minimums.
The ‘Capital Disregard’ level is basically an amount of cash savings or cash-equivalent assets like shares and ISA’s, that a homeowner can hold, without it affecting their entitlement to mean-tested State Benefits such as Pension Credit or Savings Credit. Before the increase in November 2009, the level was set at just £6,000 meaning that anyone in receipt of benefits, taking the typical minimum Equity Release sum of £10,000 immediately risked losing those benefits.
This made advising clients in those circumstances quite tricky, as the advantages of Equity Release could soon be negated by the loss of benefits elsewhere. Homeowners no longer need to worry that taking Equity Release up to £10,000 will make them financially worse off.
As part of our Equity Release Planning service, we carry out a check using sophisticated software on our client’s entitlement to means-tested benefits and demonstrate if, and by how much, they may be affected in taking Equity Release. This help ensure that they either don’t lose their entitlement, or at least know what the potential loss could be, before they proceed in taking a Lifetime Mortgage or Home Reversion Plan.
Commenting on the change, SHIP (Safe Home Income Plans) Director-general Andrea Rozario said: "Advisers were worried about explaining the risks of drawdown for borrowers on state benefits… There were loopholes round the problem but these were complicated and lengthy… Now, with capital disregard to be raised, no one's benefits will be at risk when they take out tranches of £10,000… This will have a huge, positive impact on the equity release sector” she says.
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