Making the most of pension credit entitlements

3 May 2022

4 minutes

People living in low-income households who have reached state-pension age and live with a younger partner have a small window of opportunity to be quids in.

Small window of opportunity to safeguard up to £7,000 before pension credit rules change
Existing pension credit claimants protected from changes
Government will spend £143.5bn on benefits for pensioners by 2023/24

Making the most of pension credit entitlements

If you’re living with a partner who is of a younger than you, it pays to have an understanding of your entitlements from the state, especially if you are a part of a low-income household. If one of you has reached state pension age and the other has not, what you decide to do now can make a big difference.

Currently a system of pension credits exists to supplement low-income households where at least one person in a couple has reached state pension age.

A couple is defined as those who live together as if they were a married couple in law. Two “friends” living together or siblings would not constitute a couple for such purposes.

Two types of credit

There are two parts to pension credit. The first is what is known as ‘guarantee credit’ and the second, ‘savings credit’.

Guarantee credit gives couples whose joint weekly income, including pension, falls below £255.25 a top-up to that level. The threshold for this payment went up from £248.80 in April 2019.

The second, the ‘savings credit’, for those of retirement age, is a reward for those who have saved for retirement but have a ‘modest’ income. The aim is to ensure that people who save are not penalised for doing so.

The savings credit part of pension credit only applies to those who reached state pension age before April 6th 2016. Savings credit provides up to an extra £15.35 a week for those living in a couple.

The Department for Work & Pensions (DWP) says an estimated 60% of families who were entitled to pension credit received it in 2016/17. Up to 1.3m families who were entitled to receive it did not claim the benefit and up to £3.5bn of available pension credit went unclaimed ^[1].

Window of opportunity

A small window of opportunity exists to apply for pension credit. When that window closes, mixed-age couples will need to claim universal credit, which Age UK says could reduce their household income by £7,000 a year ^[2].

Only couples who are both of pension age or older will be able to claim pension credit that some have dubbed the “toy boy tax” once the application window closes. But mixed-age couples in which one person is claiming Housing Benefit for the couple will not be able to continue to submit a claim for pension credit.

It is also important to remember that if you are in a mixed-age couple that currently receive pension credit, nothing changes for you. You will continue to get your credit.

The changes affect those eligible people who have not submitted a claim by the specified deadline.

Caroline Abrahams, charity director at Age UK, says the May 15th change is “very bad news for everyone affected. It’s a substantial stealth cut – a couple claiming in the future could receive £140 less per week than an older mixed couple claiming before the change comes in”. ^[3]

Think smart

Those not currently claiming pension credit, but who are entitled to, can beat the clock if they think smart.

The government says if you were in a couple and eligible for pension credit on 14th May 2019 but had not yet claimed it under the old rules, you have until August 13th 2019 to claim. You can ask for your claim to be backdated to May 14th or before.

Entitledto, which provides online benefit calculators, has estimated about 50,000 couples could be adversely impacted by the changes.

These include those who were single and claiming pension credit before May 15th 2019, but on or after that date started living with a partner who is under pension credit qualifying age. This is a scenario in which the former claimant will lose entitlement.

Sound advice

So what are the steps that you should take right now.

If you are eligible for pension credit as per the criteria above claim now.
If you are registered for self-assessment, you must divulge how much income tax you expect to pay for the current tax year because this affects how much pension credit you’ll get.
The quickest way to apply for pension credit is by phone: Telephone: 0800 99 1234. Textphone: 0800 169 0133 or NGT text relay (if you cannot hear or speak on the phone): 18001 then 0800 99 1234.
Paper-based claims can be made by contacting a voluntary organisation such as Citizens Advice or AgeUK.
Ensure you have a note of your National Insurance number, information about your income, savings and investments and your bank account details to hand when you claim.
Calculations used to work out entitlement do not include attendance allowance, Christmas bonus, disability living allowance, personal independence payment, housing benefit or council tax reduction.

If you are eligible for pension credit you are not too late as long as you get your backdated claim in by August 13th, 2019. Take advantage of the small window of opportunity that is still open to you before the government firmly shuts it once and for all. After this period, only those in a couple in which both people are over the state pension age will be able to apply.