If you're considering releasing capital from your home, it's important to understand how it could affect your eligibility for certain benefits. Cash released from a capital release plan is not usually classified as income, but any money you keep as savings could cause you to exceed the thresholds for certain benefits. Benefits that are conditional on resources, such as pension credit, may be affected by the release of capital. Capital release allows homeowners aged 55 and over to access tax-free cash from the value of their home.
The amount you can release is based on your age and the value of your home, and you can choose to receive it as a large lump sum or a series of smaller lump sums. If you receive a lump sum from a capital release provider, it could reduce your entitlement to certain benefits. It's important to use an accredited provider and make sure they are a member of the Equity Release Council, so that you are protected from potential risks. The money you receive from a lump sum of capital release is classified as savings, so if it exceeds £10,000, you may receive less pension credit. Releasing capital from your home can be a great way to supplement your retirement income or cover the costs of long-term care. However, it will reduce the value of your assets and may affect your right to benefits conditional on resources.
If freeing up capital saves you more than £16,000, you could lose your municipal tax reduction. The main disadvantage of capital release is that it doesn't pay you the full market value of your home. If you have people to transfer assets to, freeing up capital generally means they will have less to inherit. Saga Equity Release is a free advice service dedicated to finding out if capital release is right for you. Whether you have questions about freeing up capital or simply want to learn more, the team of experts is here to help. Before deciding whether or not to take out a capital release plan, make sure you understand all the implications and risks involved. Only consider a capital release company that is authorized and regulated by the Financial Conduct Authority.