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Case Study: The interaction between benefits and equity release

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The problem: My client is looking at various options in order to raise finance, one of those is equity release. I am conscious that they also receive a number of benefits, and having spoken at length to them, it appears they may also be entitled to other benefits which they are not currently receiving.

Given that we are discussing equity release I do not wish to prejudice their current benefits or those they might be able to claim in the future.

How do I go about ensuring this is the case?

The solution: The issue of benefit entitlement and equity release really goes hand-in-hand, although I know there are some advisers out in the field that are less than enamoured about having to deal with a client’s benefit situation.

At a recent round table we hosted, one adviser announced to the group that they did not really cover a recent client’s benefits as he knew, just from looking at their income, that they were not entitled to them.

This drew a thunderous response from the other assembled attendees, as it was pointed out to him in no uncertain terms that it is impossible to determine a client’s benefit entitlement just from reviewing their income.

As you already know the benefits path is one you should tread lightly.

The point is that the benefits system (despite many Government attempts to do the exact opposite) is incredibly complicated and it changes constantly, therefore not only do advisers have to consider what the situation is at the time they are dealing with the client, but they must also consider what potential benefits changes are coming, and how this might impact on their client.

Despite some protestations, this is a vitally important part of the equity release adviser’s role as the consequences for getting it wrong could be that you materially, and negatively, impact on the client’s income by recommending an option which means they will have some (or all) of their benefits taken away.

No-one is expecting advisers to be benefits experts but conversely no one expects them to claim total ignorance, or to send clients off to the DWP or local Citizens Advice Bureau to sort out any perceived problems.

At the very least, I suggest you use one of the systems available, such as Fintel, FreeBen, Entitled To, that allow you to use the information gleaned from the client and take a snapshot of the benefits they currently claim and those that they are able to claim.

Knowing this information will give you, and the client, a much fuller picture about their overall income and their ability to use equity release, plus any impact this might have.

It may well be that you are able to ‘find’ a considerable amount of money the client is currently missing out on and, at this stage, ascertain that the client does not need to go ahead with equity release.

What client would not be pleased to learn they are entitled to an amount of money which means they need not look at other assets? One would think if you could deliver this news you would have a captive client for life, not forgetting the potential referrals, and so on.

Overall, it is vital that you understand how your clients’ benefits might be impacted by any equity release plan they take out. 

Plus, it is always good to know whether the picture of benefits entitlement your client has is actually the true one.

Having this information will mean you are in a much better, informed situation to give the most suitable and appropriate advice.

Leaving them to their own devices or sending them off to do their own homework is never the best policy. 

If you chose to do this then you are putting your client, and your own business, at risk.

Chris Prior is sales and distribution manager at Bridgewater Equity Release 

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