A new tax allowance for low-income pensioners has made the headlines. But almost a million pensioner households are missing out on a far more valuable benefit.
In April, a new pension tax allowance (PTA) will save low-income taxpayers up to £94 a year.
Those same households may be eligible for pension credit – but, unlike the PTA, it isn't automatically applied and instead must be claimed.
Here we reveal just how valuable pension credit can be, and how it has become a gateway for other benefits.
There was some good news in the Budget for state pensioners who have relatively low income levels with the announcement of the introduction of the pension tax allowance (PTA) from April 2027.
It will mean that if your total income is between £12,570 and £13,037 a year in 2027-28, you’ll receive a tax cut of up to £94, which will offset any income tax due.
Then there is a reduced PTA provided on the next £282 of income.
However, the new allowance will only benefit a relatively narrow group of taxpayers who have total annual income of between £12,570 and £13,319
At the same time, figures released by the Department for Work and Pensions (DWP) highlighted that up to 900,000 pensioner families who were entitled to receive pension credit did not claim it in 2024-25.
In total, up to £2.4bn of available pension credit went unclaimed in 2024-25, which amounts to an average of £2,500 per year for each pensioner family entitled to receive it.
Pension credit is a means-tested benefit that tops up the state pension if you're on a low income, as well as giving you access to other valuable benefits.
It's worth around £3,900 a year, on average - but, as the DWP figures indicate, many people who are eligible fail to claim it.
This is despite years of awareness campaigns about the benefit and the ramping up of cost-of-living pressure on many pensioner households.
David Brooks, head of policy at independent financial services consultancy Broadstone, said of people failing to access the benefit: ‘Research suggests this is not simply a question of people choosing not to claim.
‘Many pensioners do not realise they are entitled to pension credit, while others are put off by the complexity of the process or by the lingering stigma that can surround means-tested benefits’.
Pension credit has two parts: guarantee credit and savings credit.
If you're single and your weekly income is below £238 in 2026-27, the guarantee credit element tops up your income to this amount.
For a couple, pension credit tops up your joint weekly income to £363.25.
Savings credit is an extra payment for those who reached state pension age before April 2016 and have some retirement income.
You might still get some savings credit even if you don't get the guarantee credit part of pension credit.
Whether you’re unsure if you have enough to retire, or are already accessing your savings, our money guidance service can talk you through your options. Which? Money members get unlimited access to them via phone.
Find out moreYou must have reached state pension age to apply for pension credit.
When you apply, the government looks at all of your income, including the state pension, any income from other pensions, and income from employment or self-employment. If you have a partner, your combined income is calculated.
Not all benefits are counted as income: housing benefit, council tax reduction and personal independence payments, for example, are all disregarded.
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 a week.
If you think you might be eligible for pension credit, you can apply online or by calling 0800 991234.
You also have the option to download a claim form and post it to Freepost DWP Pensions Service 3.
When you claim, you'll need your National Insurance number, information about your income, savings and investments and your bank account details.
Pension credit is often described as a ‘passport benefit’ because qualifying can unlock a wide range of additional financial support.
Depending on your circumstances, this can include help with the following:
Housing costs - If you receive pension credit, you may qualify for housing benefit to help with rent. Normally, this isn’t available if you have more than £16,000 in savings, but the limit doesn’t apply if you receive the guarantee credit element.
Council tax - You may qualify for council tax reduction, depending on your circumstances and the scheme run by your local authority.
Cold weather payments - Claimants may also receive cold weather payments of £25 when temperatures in their area are recorded or forecast to be 0°C or below for seven consecutive days.
Healthcare - People who receive the guarantee credit element of pension credit are entitled to free NHS dental treatment. They may also receive help with the cost of glasses or contact lenses through an NHS optical voucher after an eye test. If you're referred for treatment by a doctor, dentist or other healthcare professional, you may also be able to claim back travel costs to hospital appointments.
Free TV licence - if you or your partner receive pension credit, and one of you is over 75, you can apply for a free TV licence online or by calling 0300 790 6071.
Select the option that best describes your current situation.
