Research on intermediaries carried out by Safe Home Income Plans (SHIP) has found that the majority (51%) of equity release customers find the UK benefits system so complex that they are not claiming the benefits they are entitled to. The confusing nature of the system also means that 88% of people do not fully understand how equity release and benefits interact thus are turning to their advisers for definitive guidance.
Indeed, advisers found that clients were overwhelmingly confused about how releasing the equity in their homes might impact upon the state benefits they receive. Of these, 42% did not realise that they might be affected at all, whilst – at the other end of the spectrum – 12% thought that they might lose their benefits completely.
While consumers turned to their advisers for guidance, the lack of clear information from the Government made providing accurate advice a challenge. Many advisers were confused and almost a quarter (23%) chose to refer equity release clients elsewhere for guidance on benefits issues.
The vast majority (91%) of advisers believe that not enough is being done by the Government to clarify the issue. Such is the confusion that only 15% refer their clients to the Department of Work and Pensions (DWP) for advice on how their state benefits might be affected by releasing the equity in their home.
This research was carried out by SHIP as part of its campaign to clarify the relationship between equity release and state benefits. The campaign was launched earlier this year with a call for advisers to complete a questionnaire to provide information about their own experiences of advising equity release clients in receipt of state benefits.
The results of this research were analysed by a Working Group led by Baroness Hollis on Wednesday 13 October 2010 and the recommendations will be published in the near future.
Commenting, Director General of SHIP, Andrea Rozario, said: “These findings highlight the need for clarity and information for those seeking to navigate the benefits system. If even advisers find the system difficult to navigate then more needs to be done to make information accessible when it is needed.
“Indeed, following the Chancellor’s Spending Review, and the announcement of a single universal credit to replace many other welfare benefits, it is essential that people realise what they are entitled to. Furthermore, that there is this level of confusion in this arena shows that communication of the qualifications for benefits needs to be improved.
“Research carried out by the PPI has found that there is approximately £907 billion tied up in housing equity in the UK, showing how large a role a property can play in funding retirement. Alongside this sit figures from the DWP which show that 60% of pensioners source at least half of their income from state benefits – with 20% of pensioners receiving nearly three quarters of their income from state benefits.
“With so many people reliant upon state benefits, it is worrying that a considerable number might be missing out on the wealth from their home, simply through a lack of information. At this time, when the government is looking to cut public spending, I would urge them to work towards simplifying the system for the benefit pensioners and their budget.”