What is pension credit?
If you're less well off, there is help available to you to boost your state pension. This comes in the form of pension credit.
Pension credit is awarded to you 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.
Around four 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 you're eligible for it.
What is guarantee credit?
Guarantee credit tops up your weekly income to £163 for single people and £248.80 for couples in 2018/19. 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 £163 if you're single and £248.80 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.
What is savings credit?
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.
Savings credit is only available for people who reached state retirement age before April 2016. However, if you're in a couple and your partner reached state pension age before 6 April 2016, you could still qualify.
There's a few criteria that you needed to meet (and still do) before you qualified for savings credit:
- you have a minimum income of £140.67 a week if you're single, and £223.82 a week if you're in a couple in 2018/19
- 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, such as savings or a second pension.
The maximum savings credit you can get per week is £13.40 for a single person and £14.99 for couples.
However, the more money you have, the less you get in savings credit.
For every £1 by which your income exceeds the savings-credit threshold (£140.67 a week if you're single, and £223.82 a week if you're in a couple), your savings credit is reduced by 40p.
All of your income is added together to work out how much you'll get.
If you have any savings, the first £10,000 isn't counted. Then every £500 you have over that amount counts as £1 of income.
How do I calculate savings credit?
Say you have an income of £125.95 a week from the basic state pension, and an income of £30.05 a week from a private pension.
You also have £12,000 worth of savings. Under the savings credit rules, this counts as £4 of weekly income (£12,000-£10,000/£500).
Your total weekly income would be £160.
Your weekly income is around £20 over the savings-credit threshold. This means you would qualify for around £12 a week of savings credit.
If your income is less than or equal to the savings-credit threshold, you won’t qualify for this benefit.
Pension credit calculator
There is a pension credit calculator on the gov.uk website to help you check your eligibility for pension credit.
The calculator will also give you an estimate of the pension credit payment you are due for based on your earnings, benefits, pensions, savings and investments.
Go further: Which? Money Compare tables - let you search hundreds of savings accounts and cash Isa deals
How do I 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, or phone The Pension Service on 0800 99 1234.
Visit The Pension Service's Find your pension centre page to find out where yours is and how to contact it.
To claim, you will need your National Insurance number, information about your income, savings and investments and your bank account details,
Pension credit: FAQ
When can I claim pension credit?
To claim guarantee credit, you need to have reached the pension credit qualifying age, which is the same as the current state pension age for women. To claim savings credit, you must be at least 65.
The pension credit qualifying age is then gradually rising in line with changes to the state pension age.
From December 2018, the state pension age will rise for both men and women, until it reaches 66 in October 2020 and 67 between 2026 and 2028.
The state pension age rises again to age 68 between 2037 and 2039.
Who can you claim pension credit for?
Pension credit can be claimed for you and your partner. Your husband, wife, civil partner or someone you live with as though you are married/civil partners will count as your partner.
Up until May 2019, only the claimant has had to be over the qualifying age, your partner could be younger.
From 15 May 2019 onward, ‘mixed-age’ couples - where one person has reached state pension age (SPA), but the other hasn’t – will be unable to claim pension credit until the youngest partner reaches SPA.
Mixed-age couples with a partner under state pension age, who are already receiving pension credit, will be unaffected as long as their circumstances don’t change.
If you have a partner, the income and capital of both of you is taken into account when your pension credit is calculated.
Can pension credit be backdated?
It can be backdated for up to three months as long as you have satisfied the entitlement conditions during that period. You’ll need to request backdating on the claim form as it is not automatic.
A pension credit claim can also be lodged up to four months in advance if you are approaching the qualifying age or are about to become entitled for another reason. This allows time for the claim to be processed.
How is pension credit paid?
Pension credit payments go directly into your bank, building society or post office account.
It can be paid to someone with power of attorney or an appointee if you are not able to act for yourself.
A claimant is given the option of weekly, fortnightly or four-weekly payments.
What if I go into a care home?
If you live in a care home, or move into a care home, you may still be entitled to pension credit.
However, those with a partner may no longer count as a couple if one of you is permanently resident in a care home.
If you are a temporary resident in a care home, perhaps for respite or a trial period, and your pension credit includes housing costs, these can usually continue to be paid for up to 13 weeks and sometimes for up to 52 weeks.
Find out more about long-term care.
What if I go abroad?
You can’t get pension credit if you move abroad permanently.
If you leave the country temporarily, your pension credit can continue to be paid as normal, but not for longer than:
4 weeks where the absence is not expected to exceed 4 weeks.8 weeks where the absence is not expected to exceed 8 weeks and is in connection with the death of your partner or another close relative you normally live with.26 weeks where the absence is not expected to exceed 26 weeks and is solely in connection with you, your partner or your child receiving medical treatment.
You must intend to return within these periods at the date of departure.