Care and support

Pension credit

What is it?

Pension credit is a social security benefit administered by the Pension Service. It aims to provide a minimum level of income to all those aged 60 and over and give extra cash to people aged 65 and over who have modest incomes and have made savings for their retirement.

Capital

Pension credit has no upper capital limit and any savings you have below £6,000 are ignored (£10,000 if you are in a care home). The assumed income that you get from capital will be £1 for every £500 that you have above these amounts, e.g. capital of £8,000 counts as income of £4 per week.

How does it work?

The new pension credit has two parts: the guarantee credit and the savings credit.

The Guarantee Credit

The guarantee credit is a basic amount set by the government each year:

£124.05 if you are single £189.35 for a couple

if your income is below this you may qualify for some pension credit to top up your income to the basic amounts.

The Pension Service will refer to this in their letters to you as the appropriate amount or the standard amount. Additional amounts can be added if you have a severe disability, caring responsibilities or any housing costs, e.g. mortgage interest.

The pension credit is means-tested and therefore your income and savings will make a difference to the amount you can get.

Your income is compared to your appropriate amount and if it is less you will be paid the difference in pension credit.

The Savings Credit

If you are aged 65 or over (or one of a couple where one of you is aged 65 or over) you may be entitled to a savings credit. This can be paid with or without a guarantee credit. It will be paid if you have modest savings or extra pensions for your retirement. The savings credit will be calculated by taking into account certain income above a threshold (sometimes called a starting point). For this year the threshold will be:

£91.20 if you are single £145.80 for a couple

The maximum savings credit you can get will be:

£19.71 if you are single £26.13 for a couple

The actual amount you get will depend on your appropriate amount (see above) and the amount of qualifying income that you (and your partner) have.

You may be eligible for some savings credit if your weekly income is less than:

£173.33 if you are single £254.68 for a couple

If your income is above these amounts you may still qualify if you are a carer or severely disabled or have certain housing costs. The calculation for the savings credit is more complicated than for the guarantee credit and there are many situations where you may qualify for the pension credit. Seek advice.

Assessed income period

If you are aged 65 or over, an assessed income period will usually apply. This means that you do not need to report changes to pensions, annuities or capital as they happen. However, other changes in circumstances still need to be reported as they happen, for example, when someone else comes to live in your household. The Pension Service should write and tell you what changes need to be reported at once.

The assessed income period normally lasts for 5 years. It may be shorter if, for example, you or your partner will reach 65 in the next 5 years or there is an expected second pension or annuity to start or change (other than because of a normal yearly increase) or your capital is expected to increase significantly in the next 12 months. If the pension credit award starts from October 2003, the assessed income period may last up to 7 years.

How does pension credit affect housing and council tax benefits?

You will get the maximum amount of housing and council tax benefit if you are awarded the guarantee credit - although this may be reduced if, for example, you have other people living with you.

For more information select the link entitled help with housing costs on the right hand side of the page.

Any savings credit will count as income for housing and council tax benefit but you may still qualify for some help. However, the capital limit for housing benefit is still £16,000 for those getting the savings credit only.

How to claim

Claim on a form available from the Pension Service or over the phone on 0800 99 1234. You can also get an application form and more information from www.thepensionservice.gov.uk

Backdating

Currently pension credit can be backdated for up to 12 months as long as you can show you were entitled for the whole of the period in which you wish to claim. However the Government is proposing to reduce the backdating period to 3 months from October 08 – see www.hertsdirect.org/benefits for more information.