Pension credits: what you may be entitled to
The pension credit is designed to top-up the finances of pensioners whose income falls below minimum levels, offering them an extra, albeit thin, safety net.
The benefit is made up of two parts: the guarantee credit, which ensures your income meets a certain threshold; and the savings credit, which rewards pensioners who have saved for retirement and have a small amount of income from a private pension.
To be eligible for pension credit, you need to meet certain age and income requirements.
To be eligible for the savings credit element, you need to be 65.
The qualifying age for the guarantee credit is gradually going up to 66, in line with the increase in the state pension age for women to 65 and the further increase to 66 for men and women. To check the exact age at which you can begin receiving the state pension (and thus the guarantee credit), visit gov.uk.
In order to qualify for the guarantee credit, your weekly income needs to be below £145.40 (2013/14) if you are single, rising to £222.05 for couples.
Unlike benefits that pay a fixed amount, the guarantee credit literally tops up your income to a minimum level, (£145.40 for singles and £222.05 for couples), so how much you receive will depend on your income.
When you apply, the following information will be taken to work out your income:
- State pension (basic and additional)
- Other pensions
- Most social security benefits – for example, Carer's Allowance
- Savings, investments over £10,000 – for these, £1 is counted for every £500 or part £500
- Earnings But the following isn't included when your income is worked out:
- Attendance Allowance
- Christmas Bonus
- Disability Living Allowance
- Personal Independence Payment
- Housing Benefit
- Council Tax Reduction
To qualify for the extra savings credit, you or your partner must be 65 or over; and you are treated as a couple if you live with a partner – you don't have to be married or in a civil partnership.
The savings credit aims to reduce the detrimental impact of any private pension income on the overall amount you are able to claim. It pays 60% of any income you receive over and above the basic state pension weekly payment (£115.30 in 2013/14) up to a maximum of £18.06 a week for singles and £22.89 (2013/14) for couples.
However once your income goes above the guarantee credit threshold you start to lose savings credit at a rate of 40p for every £1. That said, some people – including carers, those with severe disabilities or specific housing costs – may be entitled to more. Check out Gov.uk's pension credit calculator to get an idea of how much you could be entitled to.
If you claim pension credit, you could also benefit from the cold weather payment. This pays £25 if the temperature falls below 0°C for seven consecutive days. A £10 Christmas Bonus is also paid to all pension credit claimants. But unlike some benefits, such as incapacity benefit, Jobseeker's Allowance and the Carer's Allowance, pension credit payments are not subject to tax.
How to claim
To claim, you'll need your National Insurance number, bank account details and information about your income, savings and investments. You can apply for pension credit four months before you become eligible. Claims can only be backdated by three months, so it's important to put in a claim as soon as possible. The easiest way is to call the claims line on 0800 99 1234.
In 2016, when the new flat-rate state pension is introduced, pension credit will still be paid to existing claimants; however, the expectation is fewer pensioners will need to claim. A means-tested top-up will remain for the poorest pensioners.
A scheme originally established in 1944 to provide protection against sickness and unemployment as well as helping fund the National Health Service (NHS) and state benefits. NI contributions are compulsory and based on a person’s earnings above a certain threshold. There are several classes of NI, but which one an individual pays depends on whether they are employed, self-employed, unemployed or an employer. Payment of Class 1 contributions by employees gives them entitlement to the basic state pension, the additional state pension, jobseeker’s allowance, employment and support allowance, maternity allowance and bereavement benefits. From April 2016, to qualify for the full state pension, individuals will need 35 years’ of NI contributions.