Check you are receiving what you are owed before using equity release
Although equity release is a proficient and secure way for older homeowners to release funds from their property quickly, Retirement Plus believes that people in this situation should check on any benefits they may be owed before releasing equity from their home.
Did you know that two and a half million pensioners (1 in 5) in the UK today are living below the poverty line but many still fail to claim the benefits they are due? Each year there is an estimated £4.6 billion of unclaimed benefits by pensioners - could some of that be yours?
This is why Retirement Plus encourages pensioners to take a serious look into State benefits before deciding to use equity release. Here are the main areas you need to check:
State Pensions
The basic state pension is paid by the Department of Work and Pensions (DWP) to people who are aged 60 for women and 65 for men – and over. The state pension age for women will increase in steps from 60 to 65 between 2010 and 2020. Qualification for the pension depends on the individual’s national insurance contribution (NIC) history. If you have not met the NIC criteria, you may not receive a pension, or may have to accept a reduced one. On top of the basic pension you may also be eligible to receive additional income based on your earnings. Some married women may also be able to claim a widow’s pension.
Pension Credit
This is for people over the age of 60 and has two elements to it. The first is the Guarantee Credit which is means-tested and is paid if the income of the applicant is below a certain amount. Anyone who qualifies for the Guarantee Credit is also entitled to full Council Tax Benefit and Housing Benefit.
The second element is Savings Credit. You can become eligible for this when you reach the age of 65. This provides additional monetary benefits for those who saved for their pension during their working life. It is supposed to act as a ‘reward’ for those who practiced retirement planning. Some individuals may receive even more Pension Credit, if they are disabled or a carer for example.
The Social Fund
Although there are sometimes exceptions, the Social Fund is only generally paid to those who receive Pension Credit. This fund is there to provide lump sum payments, grants and loans to help cover the cost of extra expenses that cannot be covered by the individual’s regular income.
Council Tax
Many pensioners are entitled to money off their council tax. The Council Tax Benefit scheme is a national welfare scheme that helps people on a low income cover the cost of the council tax for their home. People receiving the Pension Credit Guarantee Credit should have their Council Tax paid for them, although there are exceptions to this rule. You may also be entitled to some financial help if your income and savings are below £16,000.
Another scheme called the ‘Second Adult Rebate’ has been created to help those whose savings amount to more than £16,000.
Attendance Allowance
Attendance Allowance (AA) is a tax-free benefit for people aged 65 or over who need help with personal care due to a physical, sensory or mental disability. They help to cover the extra costs of illness. These benefits are not means-tested and so are not affected by how much other income or savings you have. They will also not affect any of the other benefits you are receiving or qualify for. If you start to receive Attendance Allowance, it may even increase the amount of other benefits and credit you’re entitled to. You may get an extra amount for severe disability with Housing Benefit, Council Tax benefit or Pension Credit. You also don’t need to be getting help when you apply; it is based on what help you are assessed as requiring and not the actual help you receive. Each application is assessed individually and so tailored to the individual’s disability and needs.
Winter Fuel Payments and help with heating
Winter Fuel Payments is an annual payment and is made to those aged 60 or over to help cover the costs of keeping warm during the winter. This is not taxed. Payments are usually made automatically, but some people may need to make a claim.
There are two other types of heating benefits. The first is a Warm Front Grant which can be put towards the cost of central heating, insulation, repairs and new boilers. This is means-tested to a degree, as any Child Tax Credit or Working Tax Credit will need to be divulged and income amounts amended. The second is the Cold Weather Payments. These are only given to those who receive Pension Credit and they provide some extra funding if there is a period of especially cold weather. Under the Warn Front Grant – it is means-tested as mentioned – but to a degree. Additional benefit incomes need to be divulged but only if this is either.
Health costs
Everyone in the UK over 60 receives free eye tests and free prescriptions. You may also be entitled to some funds for dental treatment, hospital travel costs etc., if your savings amount to less than £16,000. Those who receive the Pension Credit Guarantee Credit should receive all these too, at no cost to them.
Home repairs and alterations
If you receive Pension Credit you may also be able to receive a Community Care Grant to help with home repairs and alterations. Local authorities also have Disabled Facilities Grants which can be used to adapt your home if you have a disability. If you are not eligible for these grants then there are local housing charities that may be able to help.
Television Licences
These are free for households with a person aged 75 or over living there. Those who are registered blind can receive a 50% reduction and there is also a £7.50 concessionary licence for those living in a care home or sheltered accommodation.
It doesn’t stop there
As well as Government funded benefits, over 60s can save money by taking advantage of the free off-peak travel on offer as well as to make use of reduced or free ticket prices for most attractions.
There are many benefits out there for pensioners, including some which entitle the individual to a significant sum of money, and it is for this reason that Retirement Plus believes that all individuals over the age of 60 should look into their benefit options before moving forward with equity release.
The Pension Tracing Service - from the Pension Service
And, don’t forget, that if you have lost touch with a personal or company pension scheme you can go online to the Pension Tracing Service - they can help you trace a pension even if you're not sure of the contact details. It has access to a database of over 200,000 occupational and personal pension schemes. You can use this database free of charge, to search for a scheme.
Get professional advice
It would be advisable to get a State benefits check carried out by a free advice agency such as your local Citizens Advice Bureau and/or talk to your local council. They should not only be able to tell you what benefits you qualify for, they should also be able to help you with the application process. And, should you also be thinking of releasing equity from your home then you should seek advice from a financial adviser who is FSA qualified to advise on equity release - as personal circumstances will affect how much you could receive and what you might qualify for.
08 December 2008