Pension Credit has been in the news quite a bit recently in the context of who will be entitled to the Winter Fuel Payment when the changes go ahead. Only those claiming it will be entitled to the Winter Fuel Payment.
But what is exactly is Pension Credit? It is a means tested benefit available to people over State Pension age (currently age 66), with the eligibility depending on income.
Pension Credit is made up of two separate parts, Guarantee Pension Credit and Savings Pension Credit. Eligibility depends on individual circumstances.
What you might be eligible for:
State pension age reached before 06.04.16: Savings Pension Credit
State pension age reached after 06.04.16: Guarantee Pension Credit
SAVINGS PENSION CREDIT
Eligible pensioners can receive up to £17.01 per week for the 2024/25 tax year if they are single, or £19.04 per week for a couple.
GUARANTEE PENSION CREDIT
Guarantee Pension Credit tops up income to a minimum level. For the tax year 2024/25, this is £218.15 per week for a single person and £332.95 per week for a couple. In some circumstances pensioners could still qualify if their income is higher, for example if they have a disability.
Additional amounts include:
Carer Addition £45.60 per week (for those who care for someone)
Severe Disability Addition £81.50 per week (for those with a disability)
Child Addition £66.29 per week (for each young person under 20 years old)
HOW MUCH PENSION CREDIT WOULD I GET?
The actual amount of Pension Credit does vary per claimant depending on several factors including income, savings, investments and also any disabilities and caring responsibilities. According to the Department for Work and Pensions (DWP), on average Pension Credit is worth £3,900 a year. However, claimants could get less than this, or even possibly more.
ARE THERE ANY OTHER BENEFITS FROM CLAIMING?
Pension Credit is what can be referred to as a ‘gateway’ benefit. What that means is that is can provide access to additional help and support. Examples are:
Help with housing costs:
Winter fuel payment
Council Tax discount
Housing Benefit if you rent your home
Support for Mortgage Interest, if you own your home
Free TV licence for those aged 75 or over
Help with NHS dental treatment, glasses, and hospital transport costs.
We understand approximately 800,000 people have not claimed Pension Credit despite being entitled to it.
DO SAVINGS AND INVESTMENTS AFFECT ELIGIBILITY?
Pension Credit is means tested. However, savings and investments less than £10,000 or will not affect Pension Credit. If your savings and investments exceed £10,000, then the excess is taken into account. This is done by treating each additional £500 as £1 of weekly income, which is known as ‘deemed income’.
To take an example, if you have £20,000 in savings, this will be treated as an additional £20 per week as ‘deemed income’ and is added to your other income when the Pension Credit entitlement in calculated.
HOW DOES MY PRIVATE PENSION AFFECT PENSION CREDIT?
Your private pension can affect Pension Credit, even if you are yet to take income from it. It can affect entitlement in the following ways:
Where no withdrawals have been made, you are treated as though you had purchased an annuity and on which the ‘notional income’ is taken into account.
Where regular drawdowns are taken these are counted as income, but where an annuity would give a higher income, the ‘notional income’ is taken into account.
Where lump sum withdrawals are taken these are treated as capital. Where total capital savings exceed the £10,000 threshold, you would be treated as having deemed income of £1 weekly income for each £500 of the excess.
Similarly, if you claim your entire pension this is treated as capital, with the anything above the £10,000 threshold being subject to the ‘deemed income’ rule.
Income from an annuity is classed as income for Pension Credit
If you spend or give away your pension money, this can still be taken into account under the ‘deprivation of capital’ rules.
WHAT IF I DEFER MY STATE PENSION?
If you delay or defer claiming the State Pension, then the amount you would have been entitled to will be considered as income which will be added to any other income you have.
Further reading: Pension Credit: Overview – GOV.UK (www.gov.uk)
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