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Legislative changes benefit equity release

Nia Williams

November 4, 2009

Andrea Rozario, director general of SHIP, explained: “Over the last nine months, the Government has announced changes that we believe will mean that those consumers who wish to take out an equity release plan can do so in the knowledge that they may not see certain benefits reduce or cease all together.

“Most recently, they have clarified the position of equity release in relation to Support for Mortgage Interest (SMI). This contribution towards housing costs is intended to help consumers who receive one of a selection of social security benefits – including pension credit – by providing help towards the interest on any existing mortgage and certain other loans. Following clarification of the rules, we can confirm that if claimants take out a lifetime mortgage including repayment of the original loan, then they may be able to continue to receive SMI on current interest payments on the part of their new plan that covers the original loan.

“In addition, the Government has changed the rules on the application of an Assessed Income Period rules (AIP) within Pension Credit for those aged 80 years old or over. From April 2009, these customers will no longer have their retirement income and assets reviewed every five years, nor do they need to report any changes that occur to these. In effect those aged 75 and over, if in an AIP will benefit from this change.

“Finally, they have raised the capital threshold to £10,000 in Pension Credit and pension age Housing Benefit and Council Tax Benefit from November 2009, which means that pensioners can have up to £10,000 in savings without it affecting their benefit. If pensioners take out an equity release product and overall their savings remain at £10,000 or below, there will be no impact on their benefit payments.

“All these moves mean that over 65s may be able to make use of some or all of the equity in their properties to improve their standard of living in retirement without seeing their benefit payments drop or cease all together. We applaud these moves and call on all stakeholders to work together to ensure that consumers understand how equity release and benefits interact.”


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