Could equity release stop me getting pension credit?
Explains how releasing equity from your home may affect eligibility for pension credit and outlines practical steps to assess the impact.
Direct answer
Releasing equity from your home can affect pension credit eligibility if the proceeds increase your savings or income above the allowed thresholds. You should seek professional advice to understand how much you can release without losing benefits.
Could equity release stop me getting pension credit?
If you are thinking about releasing equity from your home, you need to know that the money you receive could affect your eligibility for pension credit. The rules treat the released funds as savings, and there are strict thresholds that decide whether you can still claim the benefit.
What's happening
Equity release schemes allow homeowners aged 55 or over to borrow against the value of their property. The loan, plus interest, is usually repaid when the property is sold after the homeowner dies or moves into care. While the funds are in your bank account, they are counted as part of your overall savings and income when government benefits are assessed.
Why it matters
Pension credit is a means‑tested benefit that tops up weekly income to £227.10 for a single person or £346.60 for a couple (2025‑26 tax year). If your total savings exceed £10,000, every £500 above that threshold is treated as £1 of weekly income. This means that a relatively small amount of released equity can push you over the limit and reduce or stop your pension credit.
Who is affected
The impact applies to anyone who is currently receiving pension credit or who plans to apply. The effect is not limited to the amount of equity released; it also depends on any other savings, investments, or income you already have. If you already have more than £10,000 in savings, the additional equity will be added to that total and may increase the amount of income counted for benefit calculations.
What to do next
- Check your current savings – Add up all cash, savings accounts, and investments. If you are close to or above the £10,000 threshold, any extra equity could change your benefit status.
- Speak to a regulated adviser – Financial advice is mandatory for equity release. The adviser must discuss how the product will affect means‑tested benefits as part of the advice process.
- Consider alternatives – If the equity release would jeopardise your pension credit, you might explore other ways to fund your needs, such as a smaller loan, a benefits‑aware savings plan, or a different type of financial product.
- Use official calculators – The government provides tools to estimate how savings affect pension credit. Running a quick calculation can give you a clearer picture before you commit to any product.
Sources
Key facts
- Pension credit income thresholds: £227.10 per week for a single person, £346.60 per week for a couple (2025‑26).
- Savings allowance: £10,000 of savings does not affect pension credit; each £500 over that amount counts as £1 of weekly income.
- Equity release proceeds are treated as savings for benefit assessments.
Key entities
- Equity release – A loan secured against your home that releases cash while you retain ownership.
- Pension credit – A means‑tested benefit that supplements weekly income for retirees.
- Regulated financial adviser – Must discuss the impact on benefits before you proceed with an equity release product.
Comparison and alternatives
| Option | How it works | Potential impact on pension credit |
|---|---|---|
| Equity release (lifetime mortgage) | Borrow against home value, repay later | Can increase savings, may exceed £10,000 threshold |
| Downsizing | Sell larger home, move to smaller property | May reduce capital, potentially preserving benefits |
| Government benefits check | Use online calculator to test scenarios | No direct impact, just assessment |
FAQs
Q: Will any amount of equity release automatically disqualify me from pension credit? A: Not automatically. Only the portion of savings that pushes your total above £10,000 will affect the benefit, and each £500 over that limit is counted as £1 of weekly income.
Q: Do I need to inform the Department for Work and Pensions (DWP) if I release equity? A: Yes. Any change in savings or income must be reported to the DWP, as it could affect your pension credit claim.
Q: Can I release equity and still keep my pension credit if I use the money for home improvements? A: Possibly, if the released amount keeps your total savings below the £10,000 threshold or if the improvements increase the value of your home without significantly increasing cash savings.
Bottom line
Releasing equity from your home can affect pension credit eligibility because the proceeds are treated as savings and may push you over the £10,000 threshold. Every £500 of savings above that limit is counted as £1 of weekly income, which can reduce or eliminate your pension credit. Before proceeding, obtain regulated financial advice, check your current savings, and use official calculators to understand the potential impact.
This guidance is based on publicly available information and does not constitute regulated financial advice. Always consult a qualified professional before making financial decisions.
Key takeaways
- Equity release proceeds are treated as savings and can count toward the £10,000 savings limit for pension credit.
- Every £500 of savings over £10,000 is counted as £1 of weekly income for pension credit assessments.
- Releasing equity may reduce or eliminate your eligibility for pension credit depending on the amount released and other income.
- Financial advice is required before taking an equity release product, and the adviser must discuss the impact on benefits.
- You can check your potential impact using the pension credit rules and seek guidance from regulated experts.