The release of capital does not affect your right to a state pension. Since the money released is a loan, it is not income, so there is no need to pay taxes. Your private and state pension is not affected by the release of capital. However, the guarantee credit portion of the pension credit, which supplements the declared pension to increase pensioners' weekly earnings, may be impacted.
Using a capital release plan will not interfere with your entitlement to a fixed state pension. Nevertheless, the state pension includes additional payments that are dependent on resources (pension credit) and may be affected by the release of capital. The government will assess your eligibility for state benefits, based on your capital, savings and income. The release of capital is considered a loan and, as such, is exempt from the calculation of conditional benefits to resources; however, its benefits may still be affected by the release of capital.
The state pension is not affected by the release of capital. That's because it's a universal benefit available to everyone once they reach state retirement age. The pension credit is an additional benefit conditional on resources that complements the state benefit for low-income pensioners. It has two parts: guarantee credit and savings credit.
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. Depending on the capital release product you choose, you can claim your money as a large lump sum or as a series of smaller lump sums. Most people who apply for a capital release use a lifetime mortgage.
However, some annuity mortgages now offer you the option to pay all or part of the interest, and others allow you to pay interest and principal. Just as ordinary mortgages vary from lender to lender, so do annuities. If you're worried that your capital release request will be rejected, the best thing to do is get a free confidential quote. Freeing up capital may seem like a good option if you want some extra money and don't want to move out of your house.
Mortgage Advice Bureau Later Life has a free calculator that can provide you with a quote for the amount you could release. You can free up capital and apply for a state pension as long as you continue to work, regardless of the length of time you end up working for. Finally, anyone who has worked for a certain period of time will receive the state pension, while you must choose to participate in the release of capital in order to benefit from it. You should check the impact of losing these benefits compared to the gains of receiving a capital release.
The release of capital may involve a reversal of the home or a lifetime mortgage, which is secured against your property. If you are thinking of purchasing a stock release product, you should seek financial advice from an independent financial advisor. Only consider a capital release company that is authorized and regulated by the Financial Conduct Authority. Your advisor will verify your eligibility and take the time necessary to determine if capital release is right for you.
Check out the capital release calculator provided by MAB Later Life and see how much money you could free up from your home. Capital release is only available to people aged 55 and over, so the benefits most affected are those received later in life.