Does Equity Release Affect Jobseeker’s Allowance?
Jobseeker’s Allowance (JSA) is a state benefit for people who are currently unemployed, and are in the process of finding full-time paid work (1).
The taxable funding from JSA is available to people in England, Northern Ireland, Scotland, and Wales.
What is the old style JSA?
Previously, there were two types of JSA: income-based jobseeker’s allowance and contribution-based jobseeker’s allowance. It is important to understand these forms of support, as some people are still claiming the old-style JSA, and it must not be confused with the new type.
Income-based JSA was sometimes paid in addition to the contribution-based form, and sometimes on its own. It was for people who did not meet the minimum Class 1 National Insurance contributions, whose contribution-based JSA was stopped, or who were self-employed.
Contribution-based JSA was for people with the required number of years of Class 1 National Insurance contributions.
Savings were not taken into account, so even people with over £16,000 savings were eligible. This funding was available for a maximum of six months.
Income-based JSA was sometimes paid in addition to the contribution-based form, and sometimes on its own. It was for people who did not meet the minimum Class 1 National Insurance contributions, whose contribution-based JSA was stopped, or who were self-employed.
Contribution-based JSA was for people with the required number of years of Class 1 National Insurance contributions.
Savings were not taken into account, so even people with over £16,000 savings were eligible. This funding was available for a maximum of six months.
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What is the new style JSA?
If you apply to the new JSA, your income will no longer be considered, as it is a contribution-based scheme.
While income-based JSA has been replaced completely by Universal Credit, individuals can apply to the new-style JSA alongside Universal Credit, or on its own.
The new-style JSA is offered to people who are searching for work, and are either not working at all, or working less than 16 hours per week.
Going forward, when we refer to JSA, we are specifically talking about the new, contribution-based scheme that does not involve income assessments.
What makes someone eligible for JSA?
Below, we outline the eligibility criteria for JSA:
1. Previously employed
JSA applicants must have been previously employed, as opposed to unemployed or self-employed. This is because the unemployed and self-employed will not have 2-3 years of Class 1 National Insurance contributions.
2. Unemployed
The main eligibility requirement for JSA is to be unemployed (or employed for less than 16 hours a week), and to have paid Class 1 National Insurance contributions for a suitable period of time (generally 2-3 years). There must also be evidence that you were previously employed.
3. 18+
In terms of age requirements, applicants must be at least 18 years old (though individuals aged 16-17 may be eligible in certain circumstances). Individuals over the State Pension age are not able to receive JSA.
3. Fit to work
JSA is for people who are fit to work on a full-time basis. If you have a disability or health condition that prevents you from working, you should look into the Employment and Support Allowance as opposed to JSA.
4. Available for work
The applicant must be available for work, as they will be expected to make an effort to find full-time work when they receive their payments. They must not be in full-time education, where certain grants and loans are available to people in financial difficulty.
5. Living in the UK
JSA is only available to those living in the UK. However, if you live in Northern Ireland, the application form is different, so keep this in mind.
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Is JSA short-term or long-term support?
JSA can be paid for up to six months to people who are still actively looking for work after this time. There is support along the way, with work coaches helping each claimant to improve their job search, and to eventually secure a full-time job.
How much money is provided through JSA?
For people aged 25+, the amount of money offered with JSA is £84.80 per week. The personal allowance for people aged 18-24 is £67.20 per week.
People in the same age bracket will not always receive the same weekly income. This is because they may receive a pension, or work a different number of hours.
However, no one will be denied the full amount of JSA due to having savings, unlike the old income-based JSA.
How to apply for JSA
If you meet the eligibility requirements, you can apply for JSA online or contact JobCentre Plus. The same methods can be used if you want to reclaim JSA.
The application requires a statement letter from applicants who earn an income from an annuity, workplace pensions, and/or state pensions. All applicants must provide:
- Employment details (the past six months of employment details, such as dates of work and employer contact details)
- National Insurance Number
- Bank/building society account details (a loved one’s details are also acceptable)
You can expect a response to your application within two weeks. At this point, if you are deemed eligible, you will receive an invitation to a Jobcentre Plus interview.
Ineligible applicants will receive a letter from the Department for Work and Pensions (DWP) explaining why their application was denied.
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Does Equity Release Affect Jobseeker’s Allowance?
Equity release does not affect JSA. This used to be the case, as equity release funds could make someone ineligible for income-based JSA.
However, as JSA is now completely contribution-based, the money you release from your property will not affect your payments.
This applies to all types of equity release and all equity release providers.
Is it Common to Release Equity While Claiming Jobseeker’s Allowance?
It is not common to take out equity as a JSA claimant. This is because the majority of equity release consumers are above State Pension age (66 years old), which makes them ineligible for JSA, even if they are in need of a full-time job.
What’s more, many of them are not searching for work, as they have retired.
However, it has been known for individuals under the State Pension age to release equity, as well as claiming JSA. This is only possible for people aged 55+, as this is the minimum age for equity release.
It is also much more common for lifetime mortgage customers, as home reversions (the less common equity release product) require the equity release borrower to be at least 65 years old, which is nearing State Pension age.
Another reason it is not common to combine the two types of income support is that plenty of people release equity in order to be able to stop working.
If they release a large enough sum, they can enjoy their retirement without worrying about full-time work, so they would not need to claim JSA.
Please call our 24-Hour Helpline: 0330 058 1579
Should I Release Equity Instead Of Claiming Jobseeker’s Allowance?
There is not a straightforward answer to this query, as each of our clients is in a different situation.
We will address the risks and rewards of releasing equity in favour of claiming JSA, but please remember that personalised advice is the way to go. Call us on 0330 058 1579 for expert guidance.
Our rule of thumb is that if you were already considering equity release for various reasons, and it would provide you with enough money to stop working, it is probably best to apply for equity release instead of spending time making job applications on JSA.
However, if you are considering equity release solely because you have recently faced trouble with your job, equity release could cause more problems than it solves.
1. Risks
If you are struggling with your finances temporarily, and you believe you will soon be back on track, it may be a good idea to hold off on equity release.
This applies to people who were recently made redundant or quit their job, and have a good chance of securing another well-paid role.
In this situation, there is a strong chance that you will be able to fund your lifestyle through working. If you released equity, you may then find that your income quickly returns to normal, and there is no going back from equity release.
As beneficial as it can be, it comes with compound interest, inheritance reduction, and the risk of reducing state benefits, so it is not something to pursue impulsively, without trying other options.
What’s more, if you are a younger equity release applicant, you have plenty of time to consider equity release.
It may be a good idea to increase your income through work, and then take out equity when you are no longer receiving a regular income. Though equity release funds can be very large, remember that you are relying on this money for the rest of your life.
Moreover, older equity release consumers can get different benefits, including increased equity release funds, and low interest rates.
They will also end up paying less compound interest, as they will only be on the equity release scheme from retirement to long-term care or death, rather than from 55 years old for residential care/end of life.
2. Rewards
That all said, if you believe equity release is right for you, and it will improve your finances long term, there are also unique benefits of getting involved with an equity release company as soon as possible.
As you never have to repay the loan, you could adopt the mindset that the compound interest is going to build anyway, so you may as well enjoy the loan for as long as you can.
This is only a sensible outlook if you get inheritance protection and a no negative equity guarantee, so that your family are not left with the burden of compound interest debt.
If equity release would give you enough money for a comfortable retirement, it could be argued that spending time trying to find full-time work would not bring you the same happiness.
If you were retired and receiving a regular income from equity release, you would have time to do things for yourself, and possibly even take on part-time or self-employed work that would not require JSA.
What’s more, the equity release lump sum or regular payments are often high enough to fund a lifestyle that would be otherwise out of reach.
This does depend on your method of equity release, your equity release lender, and the value of your property, but you can use an equity release calculator beforehand to find out what your equity release payments could be.
Finally, if you have a health condition or disability, you may not be eligible for JSA, but you could benefit hugely from equity release.
The enhanced lifetime mortgage allows elderly people and disabled people to access some of the best elements of equity release, such as borrowing a large amount of money, and paying reduced interest.
Please call our 24-Hour Helpline: 0330 058 1579
What Happens If I Stop Receiving JSA After Releasing Equity?
If your JSA payments stop after you have released equity from your home, there are two possible reasons for this.
One reason is that you have come to the end of the JSA period, meaning you have received six months’ worth of payments, and you have not found full-time work. In this case, your work coach will advise you on what to do next in terms of securing a job.
However, as you will have money from equity release, you wouldn’t have to worry about making ends meet while you continue to pursue the job search. You may even decide to stop looking for work, if your equity loan is taking care of your expenses.
The other reason for your JSA stopping is that you have found a full-time job, so you will be earning a regular income from this. This will not affect your equity release money, so it is simply an addition to the funds that you will already have.
Get More Advice From Equity Release Warehouse
We can help you to figure out your journey with equity release and JSA if you reach out to us on 0330 058 1579 or using our callback form.
We recommend that you seek financial advice on JSA and other types of government benefits separately, as we are not experts in government income support.
Please keep in mind that means-tested state benefits can potentially be taken away after equity release, whereas non-means-tested benefits (such as JSA) will not be.
However, for any equity release queries, including how equity release affects JSA, we are the people to ask. We have a diverse clientele, which means we are familiar with many different situations involving equity release and benefits.
Some of our clients have never had entitlement to benefits, others stopped claiming means-tested state benefits in order to be eligible for equity release, and some are currently receiving benefits and an equity loan.
Whatever your situation, we are here to show you how equity release could work for you, which includes detailing the pros and cons of each equity release plan, so that you can make a pressure-free decision.
References
[1] Jobseeker’s Allowance (JSA) https://www.gov.uk/jobseekers-allowance
