State pension explained Pension credit
If you're less well off, there is help available to you to boost the state pension you receive. This comes in the form of 'pension credit'.
Pension credit is awarded to your based on your earnings - known as a 'means-tested' benefit - and tops-up your basic state pension.
It's made up of two parts, called 'Guarantee Credit' and 'Savings Credit'. The Savings Credit element disappears for those reaching state retirement age on or after 6 April 2016.
Around 4 million people are entitled to pension credit, but according to the government, a third of those fail to claim it. This guide explains how pension credit works, and helps you find out if your eligible for it.
Go further: Tax credits - learn how other credits work in our dedicated tax guide
Pension credit - how Guarantee Credit works
Guarantee Credit tops up your weekly income to £155.60 for single people and £237.55 for couples in 2016/17. To qualify for it, you must:
- Live in the UK
- Have reached pension credit qualifying age (the same as state pension age) if you're a woman,
- Have reached the state pension age of a woman born on the same day as you if you're a man
- Have weekly income below £155.60 if you're single and £237.55 if you're in a couple
- If you're a carer, have severe disabilities or certain housing costs, you might qualify for more guarantee credit.
When you apply for guarantee credit, the government looks at all of your income. This includes both your basic and additional state pension, any income from other pensions, income from any jobs you have and any savings over £10,000.
Some benefits, such as housing benefit, council tax reduction and attendance allowance, aren’t included, nor are your personal possessions or your home.
Go further: - some more useful tips to boost your funds
Pension credit - how Savings Credit works
The government will give people a little extra money to reward them for saving towards their retirement. This comes in the form of 'Savings Credit', which disappears for those reaching state retirement age after April 2016.
There's a few criteria you need to meet before you qualify for Savings Credit.
- You have a minimum income of £133.82 a week if you're single, and £212.97 a week if you're in a couple in 2016/17
- You or your partner must be 65 or over
- You must be living in the UK
- You must have made some provisions for your retirement, like savings or a second pension
The way it's calculated works like this: for every £1 by which your income exceeds the Savings Credit threshold (£133.82 for a single person in 2015/16 and £212.97 for a couple), you get 60p of savings credit.
- So, say you have an income of £119.30 a week from the basic state pension, and an income of £29.52 a week from a private pension, your total weekly income would be £148.82
- Your weekly income is £15 over the Savings Credit threshold. This means you would qualify for £9 a week of Savings Credit.
The maximum savings credit you can get per week is £13.07 for a single person and £14.75 for couples.
If your income is less than or equal to the savings credit threshold, you won’t qualify for this benefit.
Go further: Which? Money Compare tables - let you search hundreds of savings accounts and cash Isas deals
How to claim pension credit
There are two ways you can claim pension credit. You can either post form PC1 (downloadable from the Gov.uk website) to your local pension centre. You can also phone The Pension Service on 0800 99 1234. To find out where yours is and how to contact it, visit The Pension Service's Find your pension centre page.
To claim, you will need:
- Your National Insurance number
- Information about your income, savings and investments
- Your bank account details
Changes to pension credit
The government's changes to the state pension, coming into force in 2016, will include the abolition of the savings credit element of pension credit. The guarantee credit element will continue to provide a safety net to lower income pensioners.
- Income options under the 2015 pension rules - learn more about the new pension freedoms
- Pension transfers explained - The pros and cons of switching pension provider
- The Which? Money Helpline - Get expert help with on your state pension entitlements
Which? Limited (registered in England and Wales number 00677665) is an Introducer Appointed Representative of Which? Financial Services Limited (registered in England and Wales number 07239342). Which? Financial Services Limited is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited. Registered office: 2 Marylebone Road, London NW1 4DF.