The government is urging pensioners to check if they qualify for Pension Credit, which is worth £3,500 a year on average. It also unlocks access to other benefits, such as cold weather payments, help with NHS costs and extra cost of living payments.
Following a campaign last month by the Department for Work and Pensions (DWP) encouraging eligible pensioners to claim Pension Credit, it is now sending letters to 2,000 people inviting them to apply for the benefit as part of a trial.
The DWP’s “invitation to claim” trial targets those likely to be eligible, such as people who are above state pension age and in receipt of housing benefit, across 10 local authorities. Letters and “call to action” leaflets will be sent in two waves, starting this week, with a follow-up letter sent out in August.
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Pension Credit is one of the most under-claimed and misunderstood benefits. In August 2022, there were 1.4 million people receiving Pension Credit, representing a total of 1.6 million beneficiaries including partners, according to the DWP.
But there are many hundreds of thousands of pensioners who are eligible for Pension Credit but are not claiming it. A study by consultancy Policy in Practice estimates that 850,000 pensioner households fail to claim £1.75bn annually in Pension Credit.
Tom Selby, head of retirement policy at the investment platform AJ Bell, said: “Pension Credit is an extremely valuable but chronically underclaimed benefit available to low-income households in the UK. The fact the government is finally trying to address this problem with a practical intervention is welcome, if long overdue. If the trial is successful, the government must work rapidly to expand it across the entire country.”
Pension Credit rose 10.1% in April, in line with inflation. It helps boost what pensioners get in retirement by topping up their incomes to at least £201.05 a week if they’re single, or £306.85 for couples.
It is separate from the state pension, and paid to people of state pension age on low incomes, even if they have savings, a personal or workplace pension, or own their own home.
According to analysis of customer data from retirement specialist Just Group, more than a third (36%) of eligible pensioner homeowners are failing to claim Pension Credit, losing out on an average of £1,153 of extra income every year. Many homeowners incorrectly believe they’re not entitled to Pension Credit.
“Pension Credit is a very valuable benefit for retirees and it is good to see the government taking proactive steps to boost awareness and take-up,” said Stephen Lowe, group communications director at Just Group.
We explain what Pension Credit is, who can claim, and how much it’s worth.
What is Pension Credit?
Pension Credit is a payment for people over state pension age and on a low income.
It is made up of two parts: guarantee credit and savings credit. The former tops up your pension income to a certain level, and is available to those on low incomes. The latter is only available to those who reached state pension age before 6 April 2016 and had some money saved for retirement, for example in a personal or workplace pension.
Even if Pension Credit will only provide a small amount of money to you, it’s worth claiming as it means you will qualify for other benefits:
- Support for mortgage interest (SMI) if you own the property you live in
- Housing benefit if you rent the property you live in
- Council tax reduction
- A free TV licence if you’re aged 75 or over
- Help with NHS dental treatment, glasses and transport costs for hospital appointments
- Cold weather payments
- Warm home discount
- Christmas bonus (only for those who receive the guarantee element of Pension Credit)
- A discount on Royal Mail redirection service for those moving home
- £599 cost of living payment (part of which will be paid in autumn 2023 and then the rest in spring 2024)
How much is Pension Credit worth?
Pension Credit tops up a pensioner’s weekly income to £201.05 if they are single (or £10,454.60 a year) in the current tax year. For those with a partner, the joint weekly income is topped up to £306.85 per couple (£15,956.20 a year). This is known as the guarantee credit part of Pension Credit.
But you may be entitled to extra amounts that are known as “guarantee credit”, if you have other responsibilities and costs.
For those with a severe disability, guarantee credit is boosted by a further £76.40 a week. You must get one of the following benefits to qualify:
- Attendance allowance
- The middle or highest rate from the care component of disability living allowance
- The daily living component of personal independence payment (PIP)
- Armed forces independence payment
- Daily living component of Adult Disability Payment (ADP) at the standard or enhanced rate
If you care for another adult, you could receive an extra £42.75 a week, provided you get carer’s allowance (or you’ve claimed carer’s allowance but are not being paid because you receive another benefit that pays a higher amount). If you and your partner have both claimed or are currently receiving the carer’s allowance, you can both receive this extra amount.
For those responsible for a child or young person, you could get a further £61.88 a week (which increases to £71.31 a week for the first child if they were born before 6 April 2017). The child or young person must normally live with you and be aged 19 or younger. If the child or young person is disabled, you may get another payment.
The final top-up within guarantee credit helps with housing costs. An extra payment may be made to cover ground rent if your home is leasehold, or service charges.
The savings credit part of Pension Credit is worth up to £15.94 a week if you’re single, or up to £17.84 if you have a partner.
Who is eligible for Pension Credit?
You must live in England, Scotland or Wales and have reached state pension age (currently 66) to be eligible for Pension Credit.
When applying for guarantee credit, your income is calculated; if you have a partner, your joint income will be calculated.
The DWP defines income as your state pension and other pensions (even if they’ve been deferred), earnings from a job or self-employment, and most benefits.
However, not all benefits are counted as income. Attendance allowance, child benefit, disability living allowance, personal independence payment, winter fuel allowance, housing benefit, council tax reduction and the Christmas bonus are excluded.
Your savings and investments are also taken into account, which includes shares and any property you own (apart from the home you live in). If you have £10,000 or less, this will not affect your eligibility for Pension Credit.
If you have more than £10,000, every £500 over £10,000 will count as £1 income a week. So, if you have £11,000 in savings and shares, this counts as £2 income a week.
If your income is below £201.05 a week then guarantee credit will top you up to that amount.
If you’re claiming as a couple and your weekly income is below £306.85, it will be topped up to that level.
The criteria to claim savings credit is different. You can only access it if you reached state pension age before 6 April 2016, and you have some savings and/or a private pension.
You must have an income of at least £174.49 a week if you’re single or £277.12 a week if you’re claiming as a couple.
The eligibility criteria are complicated, and is likely to be one of the reasons why many pensioners don’t bother claiming.
You can use the government’s pension credit calculator to work out if you can claim and how much you’ll get. You’ll need to have details of your earnings, benefits, pensions, savings, and investments. If you get stuck, call the helpline on 0800 99 1234 (Monday to Friday, 8am to 6pm).
Claiming Pension Credit
You can apply for Pension Credit in several ways. Options include applying online on the government website, phoning the helpline (0800 99 1234), or submitting an application by post.
If you haven’t reached state pension age yet, you can still apply up to four months before this date.
You’ll need your National Insurance number when you apply, plus information about your income, savings and investments. If you have a partner, you’ll need the same details about them too.
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