Interactive Investor

The pension credit explained

12th September 2013 13:35

Rachel Lacey from interactive investor


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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.

This article was originally published in our sister magazine Moneywise, which ceased publication in August 2020.

These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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