The pension credit explained
Find out if you can claim and get the pension credit explained with our Q&A guide to this complicated benefit.
What is pension credit?
The pension credit is designed to top up the finances of pensioners whose income fall below minimum levels. 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.
Can I claim pension credit?
To be eligible for pension credit you need to meet certain age and income requirements.
The qualifying age for the guarantee credit is tacked to the women's state pension age which is gradually being increased in line with men's to 65. To be eligible for the savings credit element you need to be 65.
For single people, your weekly income needs to be below £145.40 (2013/14) rising to £222.05 for couples.
How much will I get?
Unlike benefits that pay a fixed amount (like child benefit or job seekers allowance) 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.
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 (£110.15 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.
Some people - including carers, those with severe disabilities or specific housing costs - may be entitled to more.
It can be a difficult calculation so check out Direct Gov'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% for seven consecutive days. A £10 Christmas Bonus is also paid to all pension credit claimants.
Is pension credit taxable?
No. Unlike some benefits, such as incapacity benefit, job seekers allowance and the carer's allowance, pension credit payments are not subject to tax.
How do I claim?
If you think you or a loved one is missing out on pension credit it is important to put in a claim. You can download an application form (PC1) from the Direct Gov website however the easiest option is to apply over the phone as a trained member of staff will be able to talk you through the process. You can call the pension credit claim line on 0800 99 1234 and it is open Monday to Friday from 8am to 6pm.
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.
I've been missing out on pension credit, can I make a backdated claim?
Unfortunately claims can only be backdated by three months so it's important to put in a claim as soon as possible.
Will the new state pension affect my pension credit? In 2016 the government will be launching a new single tier state pension paying an anticipated £144 a week. Pension credit will continue to be paid for existing claimants however going forward the expectation is fewer pensioners will need to claim. A means-tested top up will remain to ensure there is still a safety-net in place 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.