Pension Credit explained

Recent research indicates that more than 850,000 older people in the UK are eligible for Pension Credit but not currently claiming it. Not only does this mean that they are missing out on extra money each month that they could be using to help with living costs, it also means that they may ineligible for other benefits, entitlements or discounts, which are only available to those claiming Pension Credit.

In this article, we look at what Pension Credit is, who is eligible for it, how it is calculated, how much Pension Credit you could receive, how to claim it and what other benefits and entitlements could also open up as a result.

Jump to:

• What is Pension Credit?
• Who is eligible for Pension Credit?
• How is Pension Credit calculated?
• How much is Pension Credit?
• How to claim Pension Credit
• What other elderly benefits and entitlements are linked to Pension Credit?
• Frequently asked questions about Pension Credit
  
  

What is Pension Credit?

Pension Credit is a benefit available to people on a low income who have reached retirement age. It is means-tested, so is only available to those who are eligible.

There are two parts to Pension Credit. Some people may qualify for one or both of these parts, depending on individual circumstances. These parts are called Guarantee Credit and Savings Credit.

Guarantee Credit

Guarantee Pension Credit is one part of the benefit. It tops up the weekly income of eligible pensioners to meet a minimum level set by the government.

Savings Credit

Savings Credit is a small top-up for eligible pensioners with a small amount of income, savings or a private pension.

Who is eligible for Pension Credit?

There are different eligibility criteria for both of the two parts of Pension Credit.

Eligibility for Guarantee Credit

The government has set a minimum weekly income for pensioners in the UK, which is currently £218.15 for single people, or £332.95 for a couple that live together (who are both over state pension age – it doesn’t matter if they are married, civil partners or not).

To be eligible for Guarantee Credit, you will need to:

• Have reached the state pension age
• Live in England, Scotland, Wales or Northern Ireland
• Have a weekly income of below the minimum limits outlined above
• Even if you have a higher income, you may still be eligible for this benefit in some circumstances, such as if you have a disability, are a carer, or have some specific housing costs.
  
  

Eligibility for Savings Credit

To be eligible for Savings Credit, you’ll need to:

• Live in the UK
• Have reached state pension age before 6^th April 2016 (which was 65 for men and 63 for women at that time)
• Have a weekly income of over the threshold amount of £189.80 for a single person or £301.22 for a couple
• Have taken some measures to save for retirement, either through a pension or with savings.

You can check your eligibility for Pension Credit on the government website, using their online Pension Credit Calculator. It will tell you if you are eligible and if so, how much you might receive.

You’ll need information like your earnings/income, pension details and any benefits you claim. You’ll also need details of any savings or investments that you have to use the tool.

How is Pension Credit calculated?

Pension Credit is based on weekly income, so before it can be calculated, it’s important to understand what is considered ‘income’ and what isn’t for this purpose, like some benefits or payments.

What counts as income for Pension Credit?

• State pension
• Other pensions, such as a workplace or private pension
• Income from employed or self-employed work
• Some government benefits, including Carer’s Allowance
• Savings and investments if over £10,000 (with every £500 over the £10,000 threshold counting as £1 of income. For example, with £12,000 in savings, this would count as £4 income a week)
  
  

What isn’t counted as income for Pension Credit?

Some benefits are not counted as income for Pension Credit, including:

• Adult disability payment
• Child Benefit
• Attendance Allowance
• Disability Living Allowance
• Personal Independence Payment (PIP)
• Housing Benefit
• Council Tax Reduction
• Christmas Bonus
• Winter Fuel Allowance

The basic calculation for Guarantee Pension Credit is made by comparing your weekly income to the minimum set by the government, of £218.15 for single people and £322.95 for couples (who both need to be eligible).

The Pension Credit top-up should bring the income of the pensioner up to that minimum level, but there can sometimes also be additional amounts. For example, if you are a carer or have a disability.

How much is Pension Credit?

The amount of Guarantee Pension Credit awarded can be different for everyone, as it’s based on making up the difference between their current weekly income and the minimum level set by the government. There may also be extra added in certain circumstances, so there is no single set amount that eligible people receive, but the average amount of Pension Credit is around £75 a week.

The amount of Savings Pension Credit awarded to those eligible will depend on the amount of income and savings or investments that the applicant has. The benefit starts to be reduced if there are savings or investments of more than £10,000.

The maximum weekly amount of Savings Credit that can be awarded is £17.01 for a single person and £19.04 for couples.

Pension Credit can be backdated for a maximum of three months, so if you apply for it several months or even years after becoming eligible, the maximum you will receive in your first payment is three months of Pension Credit.

Pension Credit is calculated on weekly income but is usually paid monthly.

How to claim Pension Credit

It’s possible to apply for Pension Credit up to four months before reaching state pension age, or any time afterwards.

If you have already applied for your State Pension, you can apply for Pension Credit online.

Alternatively, you can also apply by phone, or a family member or friend can call on your behalf if you are not able to do it yourself. The Pension Credit claim line can be reached by calling 0800 99 1234 (open Monday – Friday, 8am – 6pm).

You can choose to apply by post. You can request a claim form to be sent to you by phone (calling the number above) or download the form and print it out to fill in at home. Once completed, send the form to: Freepost DWP Pensions Service 3. You don’t need to write anything else on the envelope and you don’t need a stamp.

What other elderly benefits and entitlements are linked to Pension Credit?

For those who are eligible for Pension Credit, there can be more at stake than this benefit, because it can also make you eligible for other kinds of payments and entitlements. This means that even if you’re only entitled to a small amount of Pension Credit every month, it can still be worth claiming because of the other payments that you’ll qualify for. This could include:

Winter Fuel Payments from 2024

Currently worth between £100 - £300, this annual grant from the government is now only available to those over state pension age if qualifying for a means-tested benefit, like Pension Credit. It is paid automatically, usually every November or December.

Warm home discount

The warm home discount is a credit applied to the energy bills of those on low incomes. Those receiving any amount of the guarantee part of Pension Credit are eligible to apply for this discount, which is currently worth £150 a year and is usually applied to the energy account between October and December. Not all energy suppliers are signed up to this scheme.

Cold weather payments

If the temperature between November and March each year falls below 0°C for a continuous period of seven days or more, a cold weather payment of £25 is automatically paid within 14 working days to those claiming Pension Credit.

Free TV licence for over 75s

Saving nearly £170 a year at the time of writing, those over the age of 75, who are also claiming Pension Credit, are entitled to a free TV license each year, which can be applied for on the TV licencing website.

Reduction in council tax

Every council has its own rules on reductions, but if you are claiming the Guarantee part of Pension Credit, you are eligible for the maximum amount of council tax support. In some cases, this can mean you don’t need to pay any council tax at all.

If you only qualify for the savings part of Pension Credit, you may still be able to reduce your council tax bill, so it’s worth getting in touch with your local authority to check.

Housing Benefit

Renters receiving any amount of the guarantee part of Pension Credit are eligible for the maximum amount of housing benefit available from the local authority. Those renters receiving savings credit may also qualify for some housing benefit. Other people living in the home e.g. non-dependents, can affect the amount of housing benefit support available.

Grants for home insulation and a new boiler

There are currently government-backed schemes available in England through some energy providers for those claiming Pension Credit to get free cavity wall or loft insulation if their home is suitable for these works. For broken boilers, grants are also sometimes available to repair or replace them for free, depending on the circumstances. You can apply for support online.

Some local councils also have schemes to help those on low incomes to improve the insulation in their home, so it’s worth getting in touch with them too.

There are also schemes in Wales, Scotland and Northern Ireland.

Free NHS dental treatment

Those receiving any amount of the guarantee credit part of the Pension Credit are eligible for free NHS dental care. You will need to sign a form when visiting the dentist to receive the free treatment.

Help with the cost of glasses or contact lenses

Those receiving any amount of guarantee credit are eligible for a voucher that helps with the cost of prescription glasses or contact lenses. This can be worth anything from £39 to £215, and the form to claim the voucher can be requested when having an eye test.

Christmas Bonus

Many of those receiving means-tested benefits get an extra £10 ‘Christmas Bonus’ in with their usual payment in December each year and those claiming Pension Credit should also get this.

One-off payments, such as the Cost of Living Support Payments in 2023/24

While there are currently no more Cost of Living Support Payments planned, any future one-off payments from the government to help support those on low incomes are likely to require eligibility for a means-tested benefit, such as Pension Credit.

Discounts on other utility bills

As well as the home energy discounts or payments already mentioned, there can also be some discounts available on other kinds of utility bill too. These are usually at the discretion of the company involved, but there are often reductions applied for those claiming Pension Credit. It’s always worth contacting your supplier to see if these are available, including:

• Your water and sewerage company
• Your broadband and home phone provider.

You can also take a look at our guide to other elderly benefits and entitlements.

Frequently asked questions about Pension Credit

Is Pension Credit taxed?

Pension Credit is not taxable, so no one receiving it will pay tax on this benefit.

Can I get Pension Credit if I don’t receive State Pension?

There can be several reasons why people might not receive a state pension at all, but if they are otherwise eligible i.e. meet the income thresholds, then they can receive Pension Credit as this isn’t dependent on receiving pension.

This means that those with limited or no National Insurance contributions paid in the past may be eligible for Pension Credit.

Can I get Pension Credit if I have savings?

Those with savings can claim Pension Credit if they meet the income criteria, but those savings, along with investments, are taken into account if they are over the value of £10,000.

For every £500 over this £10,000 threshold, it counts as £1 of weekly income for a Pension Credit claim. As an example, if someone claiming the guarantee credit part and they have £20,000 in savings, this counts as £20 a week of income. So, if their actual income is £75 a week short of the government weekly minimum of £218.15 for single people and £332.95 for couples, they would only receive £55 in Pension Credit.

Can I get Pension Credit if I’m still working?

You can still claim Pension Credit if you are working because it is based on income for those over State Pension age, rather than on whether or not you are fully retired. It might be that you don’t have the full state pension available to you and are working to help supplement your income. If you meet the eligibility criteria, whether you are working or not, you can still claim Pension Credit.

Can I claim Pension Credit if I’m a homeowner?

Pension Credit is available for homeowners as well as those who rent, as long as the individual or couple meet all of the income and other criteria for claiming this benefit.

What if my Pension Credit claim is rejected?

Sometimes a claim for Pension Credit might be rejected. This could be for a number of reasons, such as making a mistake on the claim form or incorrect information being used. You can ask for the reasons why your claim was rejected and if you think it shouldn’t have been turned down, you can appeal this decision as long as you meet the deadline.

You usually only have a month to dispute a Pension Credit claim rejection, so acting quickly is important.