What is Pension Credit?

Jeff Salway

Financial journalist and mental health counsellor

Last updated 25^th March 2024

7 min read

There's never a good time to miss out on money you're entitled to. But when you're State Pension age and your household costs are squeezed, claiming all the support for which you qualify can make all the difference.

Up to 850,000 pensioners who are eligible for the income top-up available through Pension Credit are not currently claiming it, according to the government^[1]. That means they're missing out on extra financial help that can be worth over £3,900 a year^[2], as well as access to a range of other benefits.

Launched in October 2003, Pension Credit currently provides an estimated 1.4 million pensioners with an average of £75 a week.

It's important to understand that Pension Credit is separate from the State Pension. Even more importantly, unlike the State Pension, it's not an automatic payment – you'll only get Pension Credit if you claim it.

This guide will tell you all you need to know about Pension Credit, how to work out if you're eligible, and what you need to do to claim it.

How does Pension Credit work?

Elements of Pension Credit have changed over the past 20 years, but its basic design and aim remain the same.

You need to meet certain criteria in order to qualify for the payment, while the amount of income you get from it is determined by a range of factors. We'll explain all of this shortly.

Let's look first at the nuts and bolts of Pension Credit. The benefit has two parts to it:

Guarantee Credit

This is the basic element of Pension Credit, topping up the claimant's income to a guaranteed minimum level.

One way to look at the Guarantee Credit is to see it as the difference between the income that someone already has and their 'appropriate amount'. The 'appropriate amount' depends on their circumstances, such as existing pensions and savings.

You can claim Guarantee Credit if you're of State Pension age and your weekly income is less than £218.15 a week if you're single or £332.95 a week if you're a couple.

If you're a carer, severely disabled, or you have housing costs to pay (such as a mortgage), you may still qualify for Guarantee Credit even if your weekly income is above these thresholds.

Savings Credit

This is available to pensioners who reached State Pension age before April 2016 and who have extra savings or their income is higher than the basic State Pension.

To qualify for this benefit, you need to have weekly earnings above £189.80 (if you're single) or £301.22 (if you're a couple).

There's no upper savings limit, but the amount of Savings Credit you receive can be reduced if you have £10,000 or more in savings.

While most people will only be eligible for either the Guarantee Credit or the Savings Credit, some can claim both. For example, you might be able to claim Savings Credit whether or not you have Guarantee Credit.

Who is eligible for Pension Credit?

The starting point is the State Pension age. If you're claiming the State Pension and you have an income below a certain level, there's a good chance you qualify for Pension Credit.

There are quite a few criteria to be aware of, though. The main ones are:

• You live in England, Scotland, Wales, or Northern Ireland.
• You have reached the State Pension age.
• Your weekly income should be below the thresholds for the Guarantee Credit or above the thresholds for the Savings Credit.

If you have a spouse, civil partner, or you live with someone as part of a couple, they must also be included on any Pension Credit application.

When you're applying for both you and a partner, you'll qualify either if you've both reached State Pension age or if one of you receives Housing Benefit for people over State Pension age.

What counts as income?

This is where it becomes complicated. But you don't need to know or understand all the criteria – you can use the government's Pension Credit calculator(www.gov.uk opens in a new tab) or contact the Pension Service(www.gov.uk opens in a new tab).

The amount of Pension Credit you receive depends on your current earnings, your private and State Pension income, and most benefits.

Some benefits don't count towards income though, including Child Benefit, Disability Living Allowance, Personal Independence Payments, and Housing Benefit.

Savings and investments are factored in too. The main thing you need to know is that if you've got £10,000 or less in savings or investments, the amount of Pension Credit you receive won't be affected.

If you have savings and investments above £10,000, every £500 above £10,000 will count as £1 a week of income when the government is working out your income level.

What else can Pension Credit help with?

If you claim Pension Credit, there's a good chance it'll allow you to claim other financial support too.

• If you rent: Getting Pension Credit might mean you can claim Housing Benefit, which covers some or all of your rent costs.
• If you own your home: It can make it easier to get a Council Tax discount or exemption and Support for Mortgage Interest (which can help towards interest payments on your mortgage costs and any loans taken out for certain home repairs and improvement).
• You may also be able to ask your energy provider if you can claim free cavity wall and loft insulation.
• If you're aged 75, it makes you eligible for a free TV licence and Cold Weather Payments (or the Winter Heating Payment, if you live in Scotland).
• If you're a carer, you might get the Carer Addition, a benefits top-up worth up to £45.60 a week.
• If you have a disability, you may get an extra amount known as Severe Disability Addition, which is worth up to £81.50 a week.
• If you use broadband, your provider may have a cheaper social tariff – also known as 'essential' or 'basic' broadband – that you qualify for if you claim Pension Credit.
• You may be able to get help with NHS dental costs, glasses, and transport costs for hospital appointments.

How can I claim Pension Credit?

Remember, don't worry about trying to understand all the different criteria. To find out if you're eligible, you can use the government's Pension Credit calculator(www.gov.uk opens in a new tab) or call the Pension Credit claim line(www.gov.uk opens in a new tab).

Getting an estimate won't take long, but it'll be quicker if you've got the key information to hand. This includes:

• Evidence of your income, such as earnings, benefits, pensions, savings, and investments
• Your National Insurance number
• Your bank account information
• If you have a partner, you'll need the same details for them too

You'll get an estimate of how much Pension Credit you're eligible to receive. If you qualify, you can then call the Pension Credit claim line to make your claim.

You can apply for up to four months before reaching State Pension age and at any time after that point. If you apply after reaching State Pension age, you can receive up to three months of backdated Pension Credit payments.

What else do I need to know?

The main information is above, but there are a few other things worth being aware of:

There are different rules if you're in a mixed-age couple

Since May 2019, the UK government has considered mixed-age couples – where just one partner is of State Pension age – to be of working age for the purpose of means-tested benefits.

This means that if you're of State Pension age but your partner isn't, you can't claim Pension Credit until they qualify.

If you began claiming Pension Credit before May 2019 and you were part of a mixed-age couple, you can continue receiving it.

Check if you're eligible for additional payments

There are several circumstances that can qualify you for higher Pension Credit. These include being a carer, disabled, or having main responsibility for a child or children under 16. The full details are available on the government website(www.gov.uk opens in a new tab).

You can't claim Pension Credit if you live in another country

If you leave Britain permanently, you lose your entitlement to Pension Credit. Similarly, you can't apply for it if you already live outside the country.

You can still get it if you go on holiday for four weeks or less. There are some situations where you can continue receiving it even if you go away for longer than that. For instance, you can claim it for another four weeks if you've had to remain overseas because a close relative has died and you can't get back to the UK.

When to report a change

If you're getting Pension Credit but your circumstances have changed, you need to disclose it by calling the Pension Service.

For example, if you've moved address, started or stopped living with a partner, your partner has died, you've changed your name, or switched bank account.

The same applies if there's a significant change to the amount of income you get (such as taking a lump sum from your pension).

The full list of changes to circumstances to be aware of can be found on the government website(www.gov.uk opens in a new tab).

^[1] https://www.gov.uk/government/news/government-minister-urges-pensioners-to-check-eligibility-for-pension-credit-as-week-of-action-kicks-off(www.gov.uk opens in a new tab)
^[2] https://www.gov.uk/government/publications/pension-credit-toolkit/pension-credit-toolkit-advice-and-guidance-for-stakeholders(www.gov.uk opens in a new tab)

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