Equity Release and benefits.

weleasewoger

My wife and I will shortly finalising an equity release (with drawdown) on our home. I've studied the matter in detail so I'm fully familiar with all the positive and negative issues but there's something I can't seem to find a definitive answer to. 

Our combined income is too much to claim pension credit. However if I die my wife's income will be lower than the higher earnings threshold so she would qualify. How do the DWP interpret the drawdowns taken - savings or income?   We will only take drawdowns in small amounts when bills need to be paid so our savings only increase for a couple of days.

MWT

The drawdowns are a loan not income, but if they sit in her account they are considered as savings/capital so just take care not to take too much and hold it for too long.

weleasewoger

MWT
Thanks for that which is more or less what our financial advisor said.
However on saga's website for Equity Release and benefits and savings they say:
"Any money that you can access relatively easily, or financial products that you could sell on, are counted as savings for the purposes of a benefits means test"
In fact she could easily access the whole reserve of £200K + not that she would.
Hence the confusion.

MWT

https://forums.moneysavingexpert.com/discussion/comment/81938913#Comment_81938913

That sounds like a question for Saga then as it feels like an extreme interpretation, after all you can sell a car in a few mins with webuyanycar so does that count as money you can access relatively easily… or gold jewellery perhaps?

user1977

I don't think the ability to take out a loan counts.

weleasewoger

Thanks folks, you're absolutely right. Another example is that we have a credit card that's very rarely used with a credit limit of £4K which according to Saga is easily accessible so would count as savings.
I've emailed The Equity Release Council for clarity and will post their reply when received.

whizzywoo

Access to a credit card is not capital for Pension Credit purposes. However if you were to take £4,000 in cash out of the credit and put it in a bank account or under the mattress, then yes it is capital.

If you search on the Benefits board will find a few threads about draw down and what counts as income or capital.

https://forums.moneysavingexpert.com/categories/benefits-tax-credits

Altior

Notional income

The amount of means-tested benefits you receive depends on your income.

In some situations, you are treated as having income even if you do not actually receive it. This is called notional income.

You can be treated as having notional income when:

• You have deliberately got rid of income so that your benefit entitlement is higher
• You did not apply for income that you were entitled to
• You have not received income that is due to you
• Your income is paid to someone else on your behalf.

Altior

You've actually stated In fact she could easily access the whole reserve of £200K + not that she would.

In this hypothetical scenario, she could easily access £100Ks, but would try to use taxpayer funded benefits instead of her own resources, the answer is not a particularly difficult one to conclude. However, these matters nearly always fall on a DM's interpretation/judgement.

MWT

https://forums.moneysavingexpert.com/discussion/comment/81941530#Comment_81941530

Under what circumstances is a benefit recipient required to take a loan?

Altior

https://forums.moneysavingexpert.com/discussion/comment/81941623#Comment_81941623

will shortly finalising an equity release (with drawdown) on our home

Clearly we don't have all the detail here, but I would interpret that as the 'loan' is completed (finalised). ie the loan has already been authorised and is set aside in a pot of some description. Drawdown suggests the depletion of capital which can already be accessed, to me. Otherwise what would be the point of finalising equity release if you can't access the equity released, and don't plan to. To me it reads like purchasing an annuity but deferring the income (which is treated as notional income).