Pension Credit

What is pension credit?

Pension credit is an income-related benefit. It's an extra payment that guarantees most people over 62 a minimum income, yet many don't realise they're entitled to it.

According to the Government, around four million people are entitled to pension credit but a third of those fail to claim it.

Even if you find out you're only entitled to a small amount of pension credit, it's still worth claiming it as it can enable you to qualify for other benefits and help with council tax.

How much is pension credit?

Pension credit comes in two parts. The first part is a guaranteed top up for all. How much you'll get for the second part will depend on how much you have in savings.

1. Guarantee credit

   For single pensioners with weekly income (including pension) below £163, pension credit will top you up to £163.

   If you have a partner and your joint weekly income is below £248.80, it'll top you up to £248.80.

   When you apply for guarantee credit, the Government looks at all of your income. This includes both your basic and additional state pension, any income from other pensions, income from any jobs you have and any savings above £10,000.

2. Savings credit (for those 65 and over)

   The savings credit is a reward for those with a modest income who have saved for retirement. After all, if saving means you end up with little more than those who don't save, it'd discourage people from providing for themselves.

   Most people who reach state pension age on or after 6 April 2016 won’t be eligible for savings credit. But you can continue to get it if you’re in a couple and one of you reached state pension age before 6 April 2016, or you were getting savings credit up to 6 April 2016. If you stop being eligible for savings credit for any reason from 6 April 2016, you won’t be able to get it again.

   To qualify you have to have a minimum income of £140.67 a week if you're single, and £223.82 a week if you're in a couple.

   The way it's calculated works like this: for every £1 by which your income exceeds the savings credit threshold (£140.67 for a single person and £223.82 for a couple), you'd get 60p of savings credit.

   The maximum you can get per week is £13.40 for a single person and £14.99 for couples.

   Example:

   You have an income of £120 a week from the basic state pension, and an income of £30 a week from a private pension, so your total weekly income is £150.
   Your weekly income is £9.30 over the savings credit threshold. This means you would qualify for £5.40 a week of savings credit (60p for every £1 you are over the threshold).

   If your income is less than or equal to the savings credit threshold, you won't qualify for this benefit.

   If you pay mortgage interest or have other housing costs, or if you've caring responsibilities, or are severely disabled, you may be entitled to even more pension credit.

How much can you have in savings before it affects pension credit?

Any income from work is, of course, treated normally, so if you earn £10,000 a year, that's what is recorded on your pension file as your income.

When it comes to savings and investments the situation is a bit more complex. This means any money saved or invested in your name, or investment properties (excluding your home).

• The first £10,000 doesn't count.

  You're allowed to have that sum saved without it affecting your pension credit at all. This is a big boon as the majority of claimants have little more than this saved.

• Above £10,000.

  Here, it's assumed you earn £1 a week per £500 of saving, which works out at 10.4% interest. This is completely unachievable in any savings account now, and virtually unachievable at any point in recent memory. If it were an investment, it would need to be doing seriously well.

  It can only be presumed an assumption of a gradual use of capital has been factored into this calculation, plus the initial 'free' £10,000....

Example:

You have savings of £10,800 - £800 above the limit. This means you'll get a top up from your extra savings. The number of £500 extra savings (or part) equals 2, meaning £2 is added to your income.

To check your full entitlement it's best to call the Pension Credit claim line on 0800 99 1234 or use the online tool to find out how much you could get.

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