Low-income pensioner? You could gain £3k top-up
Pension Credit is an income-related benefit that tops up a pensioner’s weekly earnings if it’s below £182.60 for a single person and £278.70 for a couple.
Around 1.4 million people claim Pension Credit, but around 850,000 are missing out, according to the latest Department for Work and Pensions (DWP) statistics.
The top-up can be worth around £3,300 a year, and as such, those eligible but failing to claim are missing out on £1.7bn of cash. Given the current cost-of-living crisis, the extra cash could help boost the incomes of those struggling financially.
And one of the big boons of Pension Credit is that it acts as a gateway for other benefits, such as help with council tax, NHS prescriptions and glasses, as well as the potential for a free TV licence for those aged 75+.
To drive up awareness and applications, the DWP has launched its Pension Credit Day of Action today (15 June).
Minister for pensions, Guy Opperman, said: “We recognise the challenges some pensioners will be facing with the cost of living which is why promoting Pension Credit is a priority.
“We’re calling on everyone with retired family, friends and loved ones to check in with them and see if they can get this extra financial support, which could make a huge difference to people’s everyday lives.”
Who can claim Pension Credit?
As a simple rule of thumb – according to Martin Lewis, founder and chair of MoneySavingExpert who has teamed up with the government on this campaign – anyone aged 66 or older, with a total weekly income roughly under £200 should call the Pension Credit helpline on 0800 99 1234 or go online via the government’s Pension Credit site to check if they’re eligible.
Lewis said: “Amidst the cost-of-living crisis, it’s a national tragedy that getting on for a million pensioners are missing out on a major income boost. I’m not saying everyone will get it, but many will, and it only takes a few minutes to find out. So don’t stall, just call.”
The following information will be required:
- National Insurance number
- Information about any income, savings and investments
- Bank account details for those applying by phone or post.
Applications can be made up to four months before someone reaches state pension age and if successful, it is paid from the date of the claim, and can be backdated by three months.
Homeowners, those claiming other benefits and those with savings may be eligible. DWP explained that for those with £10,000 or less in savings and investments, it will not affect Pension Credit.
For those with more than £10,000, every £500 over £10,000 counts as £1 income a week. As an example, £11,000 in savings counts as £2 income a week.
Those with disabilities or who are carers or have responsibility for young children could gain more.
Who may be excluded from receiving Pension Credit?
Steve Webb, partner at consultants Lane, Clark and Peacock, and former pension minister, said there are three groups of people who would ordinarily be eligible for Pension Credit but who won’t qualify or will get a reduced amount:
Mixed-age couples: Previously mixed-age couples (where one partner is above state pension age and the other is below) could transition from working age benefits to pension age benefits when the older partner reached state pension age.
But from 19 May 2019, DWP changed this so the transition could only happen when the younger partner reaches state pension age.
At the time, the DWP estimated the rule change could affect 30,000 mixed-age couples in the 2020/21 tax year. As pension age benefits can be considerably higher than working age benefits (£14,492.40 a year for Pension Credit vs £6,308.64 Universal Credit standard allowance), the rule change has a big effect, and will be bigger for couples with a larger age gap.
Those with lots of capital: As above, those with £10,000+ savings aren’t absolutely barred from claiming Pension Credit, but they get imputed income at £1 per £500 for those with £10,000+ of savings. Webb said this is “less brutal than for people of working age” but is “still pretty tough” as in effect, it’s an interest rate of about 10%. The house people live in is ignored but for those with ISAs or other savings, this could be an issue.
Those yet to tap into pension cash: People who have money sitting in a pension pot but have yet to access it can be excluded from claiming Pension Credit. Webb explained that once people are over pension age, the DWP impute an annuity income from their undrawn pension, even if they aren’t actually taking one.
Webb said: “Any single person over pension age or couple where both are over pension age should consider claiming Pension Credit if they are on a low income. Pension Credit is available even if you are a homeowner, as the value of your home is ignored when benefit is worked out.
“If you have substantial savings (beyond the first £10,000 which is ignored completely) this may reduce the amount you get but you should still apply.
“Similarly, if you have untouched money in a pension pot, this will be taken into account as a potential source of income when you claim. But even if you only get a few pounds of Pension Credit, it is worth doing because of all the add-on benefits such as help with fuel bills which can make it well worth claiming.”