Will Equity Release Affect My Benefits in 2025? What You Really Need to Know

Equity release won’t affect your basic State Pension – it’s not means-tested.
It can impact means-tested benefits like Pension Credit, Council Tax Support, Housing Benefit, or Universal Credit.
If you keep the money in savings and go over £10,000, your benefits may be reduced.
Spend the money wisely (e.g., home repairs) and it may not affect benefits—track all spending.
Martin Lewis says: "Equity release can help—but it's not for everyone. Explore other options first."
Using drawdown equity release (small chunks over time) helps protect benefits and avoids interest building up too fast.
Plans approved by the Equity Release Council include key protections like the no negative equity guarantee.
Always speak to a fully regulated adviser before releasing any equity to avoid benefit loss or costly mistakes.

Will Equity Release Affect My Benefits in 2025? What You Really Need to Know

If you’re considering unlocking some of the value in your home through equity release, one of the first questions that probably comes to mind is:
“Will this affect my benefits or pension?”

It’s a smart question—and the answer isn’t always simple. Whether or not equity release will impact your income from the government depends on how much money you release, how you use it, and what types of benefits you receive.

Let’s walk through it together.

A Quick Recap – What Is Equity Release?

Equity release lets homeowners over 55 tap into some of the wealth tied up in their property without needing to sell or move. There are two main ways to do this:

1. Lifetime Mortgage

This is the most popular option. You borrow money against your home’s value, but you stay the legal owner. The loan plus interest gets paid back when you pass away or move into long-term care.

2. Home Reversion ( this is not what My Later Life does)

With this option, you sell part or all of your home to a provider in return for a lump sum or regular payments—but you can continue living there rent-free for life.

Question : "Will My State Pension Be Affected?"

Answer : "Good news – equity release won’t affect your basic State Pension."

The State Pension is based on your National Insurance contributions, not how much money or savings you have. So, even if you take out a large sum from your home, your State Pension stays the same.

But there’s a twist…

Means-Tested Benefits Can Be Affected

Here’s where it gets tricky. If you’re on means-tested benefits, equity release can impact how much support you receive.

These benefits might be reduced or stopped:

Pension Credit
Council Tax Support
Housing Benefit
Income-based ESA or JSA
Universal Credit (if you’re below pension age)
If the cash from equity release ends up in your bank account, it counts as savings—and that can reduce or eliminate your eligibility.

The £10,000 and £16,000 Rule

The government uses capital thresholds to decide how much support you should get:

If your savings go over £10,000, your benefits may be reduced.
Over £16,000, and you might lose some benefits entirely.

Example: If you release £25,000 and keep it in your account, it could disqualify you from Pension Credit or Council Tax Support. But if you use that money quickly for things like home improvements or repaying a loan, the impact might be very different.

Can Equity Release Be Set Up to Protect My Benefits?

Yes—and this is where good financial advice really matters.

By working with an expert adviser, you can:

Take money in small, staged amounts (drawdown) to avoid crossing benefit thresholds
Spend it straight away on non-counted expenses like home repairs
Avoid the risk of being seen as “depriving yourself of capital” to get more benefits

What Martin Lewis Thinks About Equity Release“It can work – but it’s not right for everyone.”

That’s the key message from Martin Lewis, founder of MoneySavingExpert.com. He encourages people to explore other options first, like downsizing or using savings. If you do go ahead with equity release, his advice is:

Take it as late as possible
Borrow the smallest amount you need
Choose plans that are Equity Release Council approved
Understand it can affect your benefits and reduce inheritance
Martin’s take is balanced: equity release isn’t “bad,” but it’s not a one-size-fits-all solution either.

Brian and Margaret, both in their early 70s, received Pension Credit and Council Tax Support.

They released £15,000 to help upgrade their kitchen and boiler. Because they used the money quickly and kept good records, their benefits weren’t affected. But if they had left it sitting in the bank, the outcome could’ve been very different.

"The extra money transformed our kitchen into a better living space. Brian and Margaret from Hertfordshire"

Want to Avoid Losing Benefits?

Talk to Us First We specialise in helping people make smart, informed decisions about equity release.

We offer a free consultation
Provide whole-of-market advice (not tied to one lender)
Help you choose the most suitable plan for your situation

Key Takeaways
Equity release won’t touch your State Pension
It can impact means-tested benefits like Pension Credit or Council Tax Support
Planning ahead can help you reduce the risk
Expert advice is essential to get it right

FAQs – Quick Answers to Common Questions

Does equity release count as income?
No—it’s considered a loan, not income, so it’s not taxed. But it may count as savings.

What happens if I spend the money quickly?

If spent on essentials (e.g., home repairs), it may not affect benefits, but always document it.

Can equity release help if I’m on Universal Credit?
Possibly, but it may reduce your payments. Speak to a qualified adviser first.

Want Personalised Advice?

Use our free equity release calculator or speak to one of our friendly advisers. We’ll guide you through everything—from how much you can release, to how to keep your benefits intact.

Call us today or start a chat now – no pressure, just answers.