Equity Release and Means-Tested Benefits: The Plain Facts

Last checked: 2 November 2026

Money released with a lifetime mortgage can reduce or stop means-tested benefits, because these benefits look at savings and capital. The value of the home itself does not count against Pension Credit, but once money is released and sits in the bank, it is counted like any other savings. For Pension Credit, savings of £10,000 or less are ignored, and every £500 above that counts as £1 of weekly income. Council Tax Reduction, Housing Benefit and Universal Credit also take savings into account. Benefits that are not means-tested, such as the State Pension, are not reduced by savings. This guide sets out the gov.uk rules in plain words. For the basics, see how equity release works.

Why released money can affect benefits

A lifetime mortgage is a loan secured on the home, for UK homeowners aged 55 and over, with no monthly payments required. The borrower keeps ownership of the home with a lifetime mortgage. While the value is tied up in the home, it is not savings. gov.uk confirms that a person can get Pension Credit even if they own their own home (gov.uk: Pension Credit).

Once money is released, it becomes cash, and means-tested benefits count cash. The more of it that is held as savings, the more it can reduce these benefits. Money that has already been spent, for example on home repairs or clearing an existing mortgage, is no longer held as savings.

Pension Credit

Pension Credit is extra money for people who have reached State Pension age and live in England, Scotland or Wales on a low income. It also opens the door to other help, such as Council Tax Reduction, Housing Benefit for those who rent, help with NHS costs for some people, and a free TV licence for those aged 75 or over (gov.uk: Pension Credit, what you'll get).

The savings rules set out by gov.uk are (gov.uk: Pension Credit eligibility):

Because this "counted" income is added to the person's other income, a larger amount of released money held as savings can reduce Pension Credit or bring it to an end. Losing Pension Credit can also mean losing the other help that comes with it.

Council Tax Reduction

Council Tax Reduction helps people on a low income or claiming benefits pay their council tax. Each council runs its own scheme, and the amount depends on the scheme, the person's circumstances and their household. gov.uk explains that household income for this purpose includes savings, pensions and a partner's income (gov.uk: Council Tax Reduction).

This means money released and held as savings can lower or end Council Tax Reduction. The savings limits differ by scheme, so the local council is the place that holds the exact rules.

Housing Benefit

Housing Benefit helps with rent, so it rarely applies to someone who owns their home. New claims are only possible for people who have reached State Pension age, or who live in supported, sheltered or temporary housing. Housing Benefit is usually refused if savings are over £16,000, apart from some people who get Pension Credit (gov.uk: Housing Benefit eligibility).

Universal Credit

Some people aged 55 and over have not yet reached State Pension age and may claim Universal Credit instead of Pension Credit. Universal Credit is for people under State Pension age, and a claim needs £16,000 or less in money, savings and investments (gov.uk: Universal Credit eligibility). Savings below that limit can still reduce the amount paid.

For a couple where only one partner has reached State Pension age, gov.uk explains that they can still claim Universal Credit as a couple, and the claim stops when both reach State Pension age (gov.uk: Universal Credit eligibility).

Benefits that are not means-tested

Some benefits do not depend on income or savings, so money released with a lifetime mortgage does not reduce them. The State Pension is the main example: it is based on a person's National Insurance record rather than their income or savings (gov.uk: Your State Pension explained). gov.uk also explains that a person who gets Attendance Allowance could get extra Pension Credit, Housing Benefit or Council Tax Reduction (gov.uk: Attendance Allowance). Free, impartial information is available from MoneyHelper.

Lump sum or drawdown: why it matters for benefits

A lifetime mortgage can be taken in two main ways:

• Single amount: all the money is released at once. Any of it not spent is held as savings, which counts towards the benefit limits above.
• Drawdown: a smaller first amount is released, and further amounts can be drawn later when needed, up to an agreed limit. Money not yet drawn stays with the lender and is not held by the borrower.

With drawdown, less money is held as savings at any one time, so the effect on means-tested benefits can be smaller. Interest is also only charged on money actually taken. Each drawdown still adds to savings until it is spent, so benefits can still be affected.

Giving money away or spending it

Giving away released money, or spending it quickly, does not always protect benefits. The law behind Pension Credit allows a claimant to be treated as still having capital they no longer have, if they got rid of it "solely or mainly to secure or increase entitlement to Pension Credit" (legislation.gov.uk: State Pension Credit Act 2002, explanatory notes). This is often called deprivation of capital. Other means-tested benefits can have similar rules.

Gifts to family can also have Inheritance Tax effects (gov.uk: Inheritance Tax).

Telling the benefits office

People who get Pension Credit must report changes to their savings, investments or property, unless they have an assessed income period, which their award letter would show. gov.uk explains that a claim might be stopped or reduced if a change is not reported, that overpaid money may have to be repaid, and that giving wrong information or not reporting a change can lead to a penalty or court action (gov.uk: Pension Credit, report a change).

What happens after an enquiry

No quote is shown on this site. After an enquiry is sent, the visitor receives a phone call and an email from an equity release broker. The broker discusses whether a lifetime mortgage is suitable for the visitor's individual circumstances, and the broker will advise on how released money could affect any benefits the visitor currently receives.

Key points

• Lifetime mortgages are only for UK homeowners aged 55 and over.
• Owning a home does not stop a Pension Credit claim, but released money held as savings is counted.
• For Pension Credit, savings over £10,000 count as £1 of weekly income for every £500 above it.
• Council Tax Reduction, Housing Benefit and Universal Credit also take savings into account.
• The State Pension is based on National Insurance records, not savings, so released money does not reduce it.
• Drawdown means less money is held at once, which can lessen the effect on benefits.
• Giving released money away can still count against benefits under the deprivation of capital rules.