Pension Credit is a confusing benefit.
- Its name is confusing - it’s not a pension and it’s nothing like tax credits (or Universal Credit for that matter)
- It’s actually a mixture of two benefits:
- Guarantee Credit, which is an income based benefit.
- Savings Credit, which is sort of the opposite of an income based benefit, in that (basically) the more money you have coming in the more Savings Credit you get.
So the more income you have the lower your Guarantee Credit and the higher your Guarantee Credit. If this doesn’t confuse you you need to read it again.
It’s perhaps worth mentioning that Guarantee Credit isn’t guaranteed, and Savings Credit has nothing to do with savings.
In fact it’s not quite as bizarre as it sounds. This is because the main benefit is the Guarantee Credit: quite a lot of people don’t get any Savings Credit at all, and even those who do will normally only get quite a small amount of Savings Credit. You cannot get more than £13.40 per week Savings Credit if you are single, or £14.99 if you are a couple.
You claim them both the same way, though, by contacting part of the DWP called the Pensions Service. You can contact them by phone on 0800 731 7898 (a freephone number). You don’t have to say which of the two you need to claim: just tell them you want to claim Pension Credit and let them work it out. However it is still a good idea to understand for yourself how it works.
Let’s put Savings Credit on one side for the moment and look first at Guarantee Credit.
Guarantee Credit
Until Pension Credit was invented, older people who did not have enough to live on were able to claim Income Support. The Guarantee Credit part of Pension Credit is, therefore, a direct replacement for this Income Support, and if you know how Income Support works you’ll already know most of what you need to know to understand Guarantee Credit.To be entitled to Guarantee Credit you need to fit the rules below:
- If you’re single, you need to have reached the ‘qualifying age’ (for more details, click here for details);
- If you’re part of a couple, only one of you needs to have reached the qualifying age (the one who has reached this age needs to be the one who claims, though, with the other person as the partner);
- Your income and savings (including those of your partner if you have one) must not be too high.
 Unlike
benefits like Income Support, Employment and Support Allowance,
and Jobseeker's Allowance, there is no restriction on working. The
government are quite happy for you to work, although any income
you receive may affect how much Guarantee Credit you actually get. |
How much will you get?
We first need to work out something called your maximum guarantee credit:
If you are single, and have no other income, you will be entitled to £163.00 per week. You may also be entitled to:
- An extra £36.00 if you are caring for someone and are entitled to Carer’s Allowance (see my page on carer's allowance for more detailed information).
- An extra £64.30 if
- You get Attendance Allowance, or the middle or higher rate of the
care component of Disability Living Allowance or either rate of the
daily living component of Personal Independence Payment and
- No other adults live with you, and
- No one gets Carer’s Allowance for looking after you.
- Extra money if you are repaying a mortgage, or have some other housing costs.
If you are part of a couple, and you have no other income, you will be entitled to £248.80 per week. You may also be entitled to:
- An extra £36.00 if one of you is a carer (£72.00 if you part of a couple, and you are both carers (for different people).
- An extra £128.60 if
- You both get Attendance Allowance, or the middle or higher rate of
the care component of Disability Living Allowance or either rate of
the daily living component of Personal Independence Payment and
- No other adults live with you apart from your partner, and
- No one gets Carer’s Allowance for looking after either of you.
- An extra £64.30 if
- You both get Attendance Allowance, or the middle or higher rate of
the care component of Disability Living Allowance or either rate of
the daily living component of Personal Independence Payment, or
you get one of these things and your partner is registered blind, and
- No other adults live with you apart from your partner, and
- Someone gets Carer’s Allowance for looking after one of you but no one gets Carer’s Allowance for looking after the other one of you.
The stuff about extra amounts due to disability is a bit confusing, so here is an example.
 Bill
and Iris are a couple: no one else lives with them. Bill gets
Attendance Allowance but Iris does not get that, or any of the
other benefits listed. She is not blind. They are therefore not entitled to either the extra £64.30 or the extra £128.60. As it happens no-one is getting Carer’s Allowance for Bill, but as they’re not entitled to anything extra anyway it wouldn’t have made any difference if they had. Then Iris gets awarded Attendance Allowance as well. Still no-one gets Carer’s Allowance for looking after either of them. They are therefore entitled to an extra £128.60 per week. Then their daughter, Sarah, gets Carer’s Allowance for looking after Bill. They can therefore no longer get an extra £128.60 per week as someone is getting Carer’s Allowance for one of them. But they can get an extra £64.30 per week. Then their son, Tony, gets Carer’s Allowance for looking after Iris. As both of them now have someone claiming Carer’s Allowance for looking after them, they cannot now get the extra £64.30 either. At the moment, therefore, they are just entitled to the standard couple amount of £248.80, compared with the amount they were getting before anyone claimed Carer’s Allowance for either of them: £377.40. |
This all leads to an obvious warning:
If you are thinking about claiming Carer’s Allowance for looking
after someone, think again, and talk about it with them first, if
this is possible, as by getting this you may end up reducing their
Pension Credit. |
What if you have other money coming in, or savings?
This is fairly simple: your Guarantee Credit is reduced by the amount of any income you have coming in.
There are some complications, though:
- Some benefits are ignored and don’t reduce your Guarantee Credit. The main ones that are most likely to affect you are Disability Living Allowance, Personal Independence Payment, Attendance Allowance, Child Benefit, and Child Tax Credit;
- £10 is ignored from some benefits are partly ignored; widowed parent’s allowance and war disablement, for example;
- If you are still working, some of your earnings are ignored: this is normally £5 per week if you are single, and £10 is you are a couple, but can be £20 is ignored in some circumstances; for example, if you (or one of you) is a carer, or one (or both of you) get any Disability Living Allowance, Attendance Allowance, or Personal Independence Payment.
- If you have more than £10,000 in savings, or other capital (for example a house that you don’t live in), each further £500 (or bit of £500) you have is treated as £1 income each week.
Let’s see how this works out in practice
| Back
to Bill and Iris. The last time we checked they were both getting
Attendance Allowance, and because people were getting Carer’s
Allowance for looking after both of them they were not entitled to
any extra amounts because of disability. In fact, even though Iris is disabled she keeps herself active by working part-time at the corner shop. I can now tell you that they have the following income (as well as their Attendance Allowance awards):
Remember that without any income their Guarantee Credit would be £248.80. With this income they will get £92.80 Guarantee Credit. |
Savings Credit
Savings Credit is really weird. You might even say it’s more trouble than it’s worth.
It was invented in 2002 because people were complaining that if you had been careful during your life and saved money this reduced the amount of means-tested benefit you were entitled to when you retired. The government of the time wanted to find a way to reward people for being careful. Whether it achieves this or not is a good question.
Oh, and just to add to the confusion, you cannot get it until you are 65, which might be quite a lot later than when you can claim the Guarantee Credit.
The way it works, put simply, is this: if you have money coming apart from the Pension Credit itself you get a small amount of extra money to reward you for this.
The detail of how the calculation works is quite complicated but here’s a brief summary of some of the key details:
- You cannot get more than £13.40 per week if you are single or £14.99 if you are a couple;
- The amount of savings credit you can get depends partly on your ‘qualifying income’: this is assessed in just the same way as for Guarantee Credit except that the following kinds of income are ignored and don’t help you get Savings Credit: working Tax Credit, Incapacity Benefit, contribution based Jobseeker's Allowance, Severe Disablement Allowance, Maternity Allowance, Maintenance Payments, and contribution based Employment and Support Allowance. Don’t forget, too, that anything that is ignored for Guarantee Credit is ignored for Pension Credit: so Attendance Allowance, for example, does not count as qualifying income.
- As with Guarantee Credit, income includes any money you are treated as receiving because of any savings or other capital you have (if you have more than £10,000 in savings, or other capital (for example a house that you don’t live in), each further £500 (or bit of £500) you have is treated as £1 income each week).
- You cannot get any Savings Credit if your qualifying income is less than £140.67 per week if you are single, or £223.82 if you are a couple.
If you’re eager for more detail, click here.