Pension credit: What is it and how can you claim as poverty charity warns 30% of those who qualify aren't applying
A staggering 770,000 people are not applying for pension credits to boost their income - despite the cost-of-living crisis continuing to send household bills rocketing.
Poverty charity Turn2us says around 2.5 million people over the age of 66 can ask for the extra money to top up their retirement income, yet around 30% of those who qualify aren't claiming it.
With an estimated £1.7bn - according to the Department for Work and Pensions (DWP) - left unclaimed in 2019-20, campaigners are urging those on low incomes and either of, or close to, state pension age to investigate whether they're entitled to more.
So what is pension credit, who is entitled and how do you get it?
Pension credit is designed to top up people's retirement income when they reach state pension age, but it has the lowest uptake of any income-related benefit. Separate from your state pension, it is means tested, which means officials will look at your finances, including income and capital, to work out whether you qualify for more Government help each month.
Paid for by the Pensions Service, which is part of the DWP, you may be able to claim it whether or not you're still working, albeit earnings are taken into account when calculating your income, but you don't need to have paid any National Insurance contributions and it is tax free.
Michael Clarke, head of information programmes at poverty charity Turn2us, says it could be a lifeline for people struggling this year.
He explained: "Pension Credit can act as a vital lifeline for people aged over 66 who might be on a low income and it is crucial for people to find out whether they are eligible to claim. The impact of the cost-of-living crisis cannot be underestimated, and in the coming months, additional sources of income will be a huge help for people to weather this financial storm."
How is it calculated?
The Government has set pre-determined weekly income amounts it says people in the UK of state pension age need to live off. These are called 'appropriate minimum guarantees' and are the minimum amounts of money the Government says you need to be able to live week to week. For the 2022-23 financial year this is £182.60 a week for a single person and £278.70 a week for a couple.
When you apply for Pension Credit your income is calculated - and if you have a partner this is done together. Pensions, certain other benefits, assumed income from savings or investment and any earnings are all added up.
If you have £10,000 or less in savings and investments this will not affect your Pension Credit. If you have more than £10,000, every £500 over £10,000 counts as £1 income a week. For example, if you have £11,000 in savings, this counts as £2 income a week.
Organisation Independent Age believes the additional benefit for those able to take it up could make all the difference.
Morgan Vine, head of policy and influencing, said: “We know Pension Credit has the potential to lift 440,000 older people out of poverty, yet it still has the lowest uptake of any income-related benefit. Too many people in later life are still having to choose whether to heat their home or buy food, despite being eligible for this financial support.
"Pension Credit is a gateway to other financial support, and we estimate that if someone received all the additional money that Pension Credit provides a springboard to, they could get up to £7,000 a year more money in their pocket. As the unprecedented rise in the cost of living continues to hit hard and push more older people to crisis point, it has never been more important for the money set aside to reach the people who need it."
What might you get?
Pension credit will top up your income, if it is deemed to be falling short and you're eligible, to £182.60 a week if you're single or to £278.70 if you're a couple.
However the addition of Pension Credit to your monthly monies can also serve as a gateway to other help such as council tax reductions, the Warm Home Discount and housing benefit. For people aged 75 and over, they are also eligible for a free TV licence as part of the support. Those in receipt of Pension Credit also have a passport to additional help coming this year designed to further ease the cost-of-living crisis such as Rishi Sunak's additional £650 payment, expected next month, for those on means-tested benefits.
If you have a severe disability you could also get an extra £69.40 a week in Pension Credit if you also claim other specific support payments. or if you care for another adult you may be given an extra £38.85 a week if you also get a Carer's Allowance. There is also extra Pension Credit help for those looking after children or young people or under-18s with a disability.
Latest DWP figures suggest Pension Credit can be worth up to £3,300 per year, depending on a person's or couple's circumstances, with an estimated 770,000 pensioners currently missing out by not submitting applications.
How do you claim?
A Pension Credit application can be started, say officials, four months before reaching state pension age. You can also apply any time after reaching state pension age, but claims will be backdated for only three months.
Turn2us has its own benefits calculator here, which people can use to help guide them towards the additional help to which they might be entitled.
Applications to the Pensions Service can then be made online, by phone or through the post, depending on your circumstances. More details about each of these processes and how to begin them is available here.
Those applying will need to provide some personal details, including National Insurance number and information about incomes, savings and investments.