Pension Credit
Boost your retirement income with a state top-up
Pension credit is a tax-free benefit aimed at retired people on low incomes. It is means tested but for those who qualify can be worth up to thousands of pounds a year. However, an estimated 1.3 million people who are eligible don't claim pension credit - in many cases because they don't realise they're entitled to it.
Some couples could be missing out up to £7,000 a year if they don't apply before 13 August. This guide tells you what pension credit is, how you make a claim and crucially how much you'll get.
In this guide
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What is pension credit?
Pension credit is an income-related benefit aimed at people over the state pension age (currently rising from 65 to 66 for both men and women). It offers older people a weekly top-up to their income.
It is available to single pensioners, including widows and widowers, as well as couples.
According to the Government, nearly four million people are eligible for pension credit, but a third of those fail to claim it - in many cases because they don't realise they're entitled to 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?
It varies depending on your circumstances, but can be worth up to thousands of pounds a year.
Pension credit has two parts: guarantee credit and savings credit. Guarantee credit is a top-up for those on low incomes. Eligibility for savings credit depends on when you reached state retirement age and how much you have in savings.The benefit offers a weekly top-up to your income, and is made up of two elements:
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For single pensioners with a weekly income (including pension) below £167.25, pension credit will top you up to £167.25.
If you have a partner and your joint weekly income is below £255.25, it'll top you up to £255.25.
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 or social security benefits you have, and any savings and investments above £10,000.
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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 aren't eligible for savings credit.
But you can continue to get savings credit if you were getting it up to 6 April 2016 or you're in a couple and one of you reached state pension age before 6 April 2016. So while a couple can continue receiving savings credit even though one partner wasn't at state pension age before 6 April 2016, that same couple can't make a new claim. 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 £144.38 a week if you're single, and £229.67 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 (£144.38 for a single person and £229.67 for a couple), you'd get 60p of savings credit - up to the weekly maximum of of £13.73 for a single person and £15.35 for couples. 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, caring responsibilities, are responsible for a child, or are severely disabled, you may be entitled to even more pension credit. Use our guide and universal credit and benefits calculator to give a clearer picture.
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 savings, 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 that 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.
Quick questions
How do I qualify for pension credit?
To qualify for pension credit:
- You must live in Great Britain.
- You must have reached state pension age (currently rising from 65 to 66 for both men and women).
To make a new claim for the extra savings credit:
- Men must have reached 65 and women 63 (the then state pension ages) before 6 April 2016. If you're in a partnership, both of you must have reached state pension age by that date. You're treated as partners if you live together. You don't have to be married or in a civil partnership.
Special rules and two important exceptions for couples
For couples, from 15 May, you can only start claiming if BOTH partners have reached state pension age (now 65 rising to 66 for men and women).
Mixed-age couples, where only one partner has reached state pension age, will have to claim universal credit instead – worth much less for many people.Tens of thousands of people are expected to lose out from the rule change. Charity Age UK calls the change an "age gap tax" which could cost some couples up to £7,000 a year in pension credit, and for those with a gap of more than five years up to £35,000 in total.
- An exception to this is if one partner has reached state pension age and is claiming housing benefit for the couple, in which case they'll be able to claim pension credit.
- Mixed-age couples (where one partner has reached state pension age before 15 May but the other is still of working age) can make a new claim under the old rules up until 13 August – but it's important that they request their claim be backdated.
If you think you're eligible, use our 10-minute universal credit and benefits calculator to see what you're entitled to.
Quick questions
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The quickest way to claim pension credit is to call the Pension Service on 0800 99 1234. It will even fill in the application form for you.
You'll need:
- Your national insurance number
- Information about your income, savings and investments
- Your bank account details
You can make a paper application if you're unable to make a claim by phone. You can get a friend or family member to call the helpline to ask for a paper application.
The earliest you can start your application is four months before you reach pension credit qualifying age.
You can claim any time after you reach pension credit qualifying age, but your claim can only be backdated for three months.
The Department for Work and Pensions (DWP) says that when people apply for pension credit or pension-age housing benefit they can ask for their claim to be backdated.
Claims for both benefits can be backdated by up to three months, provided you would have been entitled to the benefits at the earlier date.
There is no separate form to complete – you can ask over the phone when you apply or, if you apply by post, put on the application form that you want to backdate your claim.
So if you're in a mixed-age couple, where one of you reached state pension age before 15 May, you can apply under the old rules and ask for your claim to be backdated by up to three months.
If you put in a new claim on 15 May (after the new rules have taken effect), you could still qualify – and be paid – from the middle of February, depending on when you qualified for the benefits.
This grace period means that mixed-age couples could have until 13 August to put in a new claim for pension credit and/or housing benefit and qualify under the old rules – but the sooner you do it, the better. Claiming just after the deadline in May could yield pension credit top-ups to your income going back to mid-February. Delay until August and you'll only receive top-ups from May.
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