Pension credit: a guide
If you’ve retired, are on a low income and have limited financial means, you may be eligible for a pension credit to supplement your state pension and mitigate your financial struggles.
One in three people who are entitled to receive pension credit don’t claim it, simply because they don’t know they can. If you’ve reached state pension age and are on a low income, you may be missing out on hundreds of pounds a year. On this page, you’ll learn everything you need to know about pension credit and find out if you’re eligible to claim it.
- Pension credit is an income-related benefit for those over state pension age who are on a low income
- If you’re eligible to receive pension credit, you’ll either get guarantee credit, which supplements your weekly income, or savings credit, which pays you extra money if you saved for a pension
- There’s no limit to the amount you can have in your bank account when applying for pension credit, but having more than £10,000 in savings can affect how much you’ll receive
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What is pension credit?
Pension credit is a means-tested income benefit aimed at those over the state pension age on a low income. This income support is in addition to your state pension and is available to single pensioners, widows and couples.
However, while more than three million households in the UK could claim, many people don’t realise they’re eligible for pension credit.
Who is eligible to claim pension credit?
To qualify for pension credit, you must meet the following criteria:
- You must be living in the UK
- You must have reached state pension age, which is currently 66 for both men and women
If you’re claiming as a couple, you’ll only be eligible if:
- Both partners have reached state pension age
- One of you is receiving housing benefit for people who are over state pension age
A partner can be your husband, wife, civil partner or someone you’re in a cohabiting couple with.
How much pension credit can I claim?
The average weekly amount for pension credit is £58, totalling more than £3,000 a year. However, exactly what you’ll get will depend on a few factors, including the following:
- How much income you receive
- How much money you have saved or invested
- If you’re a couple, how much your combined income and savings is
Pension credit is available in two forms. Depending on your circumstances and eligibility, you’ll have the option to apply for either guarantee credit or savings credit.
Guarantee credit supplements your weekly income if it’s below a certain threshold. In 2020/21, this threshold is £173.75 for single pensioners and £265.20 for couples. The amount you receive from guarantee credit depends on how much you need to reach these thresholds.
In addition to living in the UK, to qualify for this credit, you’ll need to meet the following criteria:
- To have reached the qualifying age for pension credit, which is the same as the state pension age
- To have a weekly income below £173.75 if you’re single, or below £265.20 if you’re a couple
There are circumstances in which you could claim additional support. If you’re a carer, have severe disabilities or have certain housing costs such as a mortgage, for example, then you may be able to qualify for more guarantee credit. The exact amount you’ll get will be determined by the government when you apply, and will be based on all aspects of your income, including the following:
- Both your basic and additional state pension
- Any savings account that contains over £10,000
- Any income from other pensions, investments or jobs you may still have
Savings credit could entitle you to receive extra money from the government as a reward for saving for your retirement. The eligibility for this is slightly stricter than it is for guarantee credit, as savings credit is only available if you reached state pension age before the 6th April 2016. However, if you reached the qualifying age after this date, but your spouse or civil partner reached this age before you, you may still qualify.
In addition to age requirements and being a resident of the UK, you must meet the following criteria to qualify for savings credit:
- You must have a minimum weekly income of £150.47 if you’re single, or £239.17 if you’re a couple
- You must have made some provisions towards your retirement, including savings or a second pension scheme
The maximum savings credit you’ll receive is £13.97 per week if you’re single and £15.62 per week if you’re a couple. The more money you already have, the less credit you’ll receive.
The way it works is that for every £1 by which your income exceeds the savings credit threshold of £10,000, your savings credit is reduced by 40p. You can account for your total income to calculate how much savings credit you’ll receive.
How much money can I have in the bank and still claim pension credit?
Since pension credit is means-tested, the amount of money you have determines how much credit you’ll receive. If you reached state pension age before the 6th April 2016, you can claim the savings credit part of the pension credit. There’s no limit on how much money you can have in your savings to claim savings credit, but, as we’ve shown, having over £10,000 affects how much you’ll receive.
If you’re claiming guarantee credit, the maximum amount you can earn per week to be eligible is £173.75 if you’re single, or £265.20 if you’re a couple, which will be the total of all your income streams. As with savings credit, having more than £10,000 in savings may mean that you won’t receive the maximum amount of guarantee credit.
How do I claim pension credit?
The easiest way to claim pension credit is through the gov.uk website. Alternatively, you can call the Pension Service on 0800 99 1234. Some of the information you’ll need to provide includes the following:
- Your National Insurance number
- Information about your income, savings and investments
- Your bank details
- Information about your pension, if you have one
- Details regarding any housing costs
If you’re unable to claim by phone, paper applications are also accepted. If you choose to do this, the earliest you can start your application is four months before you reach state pension age. While you can claim any time after you reach that age, your claim may only be backdated up to three months, meaning you could miss out on benefits.
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