Here’s Why Older Pensioners Especially Should Apply for Pension Credit
Today I’m focusing on pension credit.
According to the government’s own figures, around a third of retirees who would be entitled to this state benefit aren’t currently claiming it. That means they are potentially missing out on an important boost to their pension.
Even more significantly, it means they may be missing out on a raft of other benefits and discounts too, for which pension credit acts as a gateway. More about this shortly.
Applying for pension credit is especially crucial for people who reached retirement age before April 2016 and therefore receive the old basic state pension rather than the new (higher) one. While it may seem (and indeed be) unfair that older pensioners receive a lower rate, they do have the opportunity to claim the savings credit element of pension credit, which newer retirees don’t.
Savings credit payments can provide an extra boost to your income and entitle you to other payments and benefits as well. And, very importantly, the eligibility rules are different from guarantee credit and (in my view anyway) a bit less stringent. But if you don’t apply for pension credit, you won’t get either.
But before we get into that, let’s recap on what pension credit is.
What is Pension Credit?
Pension credit is a state benefit that comes in two parts: guarantee credit and savings credit.
Guarantee credit boosts your weekly income to £182.60 if you’re single or £278.70 if you’re a couple (figures correct from 6 April 2023). You should be eligible for guarantee credit if you have reached state pension age and your total income is less than these amounts (even if you own your own home).
If you have under £10,000 in savings and investments this will not be taken into consideration. If you have over £10,000, it will be assumed that you earn £1 a week per £500 of savings and investments. This will be added to your total income when working out your eligibility for guarantee credit.
Savings credit is only available to people who reached the state pension age before 6 April 2016. It is meant as a reward for those who have made some additional provision for their retirement. It’s worth up to £15.94 a week for a single person or £17.84 for couples (2023/24 figures). Somewhat counter-intuitively, to qualify you must have a minimum income of £174.49 a week if you’re single and £277.12 a week for a couple (again 2023/24 figures). You must also have some savings or other extra income provision (e.g. a private pension).
It’s worth adding that if you pay mortgage interest or have other housing costs, have caring responsibilities, are responsible for a child, or are severely disabled, you may be entitled to more pension credit. If you receive attendance allowance or carers credit, for example, this may boost the amount that you’re entitled to.
The rules surrounding all this are complicated, but the government has provided a free online calculator you can use to work out whether you qualify and how much you might get. This is for guidance only, however. You can’t apply via the calculator and there is no guarantee you will receive the amount it shows you.
Until recently to actually apply for pension credit you had to phone the DWP’s pension credit helpline on 0800 991234 with your Nl number, details of your income, savings and investments, and your bank account details. The person you spoke to would then then take you through the application process. This option is still available, but recently an option to apply online has been added. This is quite separate from the free online calculator mentioned above.
As I recently helped an elderly friend do this, I can confirm that the online method works well, though the questions asked don’t entirely correspond with the questions on the free online calculator. But using the latter first should give you an idea whether you are likely to qualify for pension credit and how much you might get. You can also try the effect of changing the amount of capital/income in the calculator to see if you might qualify in future even if you don’t at present (perhaps due to having too much in savings).
Additional Benefits
As well as the money – which can amount to thousands of pounds a year – if you receive pension credit you will be entitled to a range of additional discounts and benefits. These may include:
- reduced (or free) council tax
- housing benefit
- free TV licence if you are over 75
- free NHS dental treatment
- help towards the cost of glasses
- help with the cost of travel to hospital
- cold weather payments
- automatic entitlement to the Warm Home Discount
- free home insulation and boiler grants
- extra money if you’re a carer
- government cost of living payments
Even if you only receive a small amount of pension credit, you may be eligible for any of the above. So it really is well worth applying if there is any chance you may qualify.
More About Savings Credit
As I said above, only older pensioners who retired before April 2016 can get savings credit. But potentially a lot more people in this category may be eligible for it than is the case with guarantee credit.
Whereas guarantee credit is only paid to pensioners on a low income and with limited savings, that isn’t necessarily the case with savings credit. As I noted above, to qualify for savings credit there is actually a minimum earnings limit. And you do actually need to have some savings (or other income source/s apart from the state pension) to be eligible.
The rules are complicated, so – as I said above – the best thing is to use the free online calculator. If it appears you are eligible for savings credit (or guarantee credit) it will tell you, and how much.
It should be said that if you are only awarded savings credit and not guarantee credit, you may not qualify for all of the extra benefits mentioned above (free NHS dental treatment, for example). But you should still qualify for some, including (very importantly) the government’s extra ‘cost of living’ payments, which in 2023 will comprise three payments totalling £900. That alone is likely to be worth more than the savings credit payments themselves.
Even if, with savings credit only, you don’t qualify for the whole of the discounts mentioned, you may at least be eligible for a partial reduction in some cases.
- For the latest news and information about pension credit, please click here.
Closing Thoughts
To sum up, if you’re of state pension age and have a limited income or savings, you should certainly look into pension credit. Similarly, if you have elderly friends or relatives, you should check eligibility on their behalf (with their permission, of course).
As I’ve said above, this applies especially to anyone who started receiving the state pension before April 2016 and is therefore getting the old basic state pension. This is lower than the new state pension, but you may potentially be eligible for the savings credit element of pension credit (as well as guarantee credit, which anyone of state pension age can qualify for).
While savings credit is generally only a small amount, receiving it will make you eligible for a range of other discounts and benefits, including the government’s cost of living payments. So it really is well worth checking on the free online calculator and then applying (by phone or online) if it appears you might be eligible.
Finally, you might like to know that (thankfully) my friend’s online application was successful. He got a letter a week later saying that he would be receiving pension credit (savings credit only) at a rate of about £5 a week, rising to just over £6 a week in April. Naturally he was pleased to hear this. And he was even more pleased when he realised he would be getting extra cost of living payments starting with £301 later this month, and other benefits and discounts as well. As an 83-year-old man who has recently lost his wife, this will certainly help make life a little more bearable for him in the months ahead.
As always, if you have any comments or questions about this article, please do post them below. Just bear in mind that I am not a qualified financial adviser or benefits adviser and cannot provide personal financial advice. If you require specific advice or assistance, your local Citizens Advice office would be one good place to start.