Pension credit

If you live in England, Scotland or Wales and reached the State Pension age, you could be eligible for the pension credit. You could have access to other benefits too. This blog will make you understand the pension credit, its eligibility criteria and how you can claim the pension credit.

What is Pension credit?

Pension credit is a tax-free benefit provided to people with low income over the state pension age. It is an additional income for which you may get eligible even if you have a pension, savings, or own home. Even a small Pension Credit award can provide access to a variety of other benefits. Pension Credit can also cover housing expenses such as ground rent or service fees.

Other benefits if you are eligible for Pension credit

If you are eligible for pension credit, you could have access to additional benefits such as –

1. Housing benefit (In case you rent the property you’re living in)
2. Reduction in Council tax
3. Mortgage interest support (In case you own the property you’re living in)
4. A free TV license (In case you’re aged 75 or above)
5. Heating costs
6. Assistance with NHS dental treatment, glasses, and hospital transportation costs

Who is eligible for pension credit?

To qualify for pension credit, you must meet the following eligibility criteria –

1. You must be a resident of the UK – England, Scotland, Wales or Northern Ireland
2. You must be over the state pension age

If you have a partner

You will be eligible if either of the following conditions is met:

1. You and your partner have both reached the State Pension age,
2. One of you receives Housing Benefit for people over the State Pension age.

Who will be called a “Partner”?

A partner is either –

1. Your wife, husband or civil partner (In case you’re living with them)
2. If you’re living with someone as a couple, not being married or in a civil partnership

Also See: How to Claim Universal Credit And Pension Credit

How much is pension credit?

Pension credit is divided into two parts. The main component is "guarantee credit”, a Top-up for people on a low income. The second component is the "savings credit," which benefits low-income pensioners who have not managed to save a little extra towards their pension income. You can be eligible for one without being eligible for the other. Heres how each one works:

1. Guarantee credit

   – Guarantee credit top up your weekly income to a guaranteed minimum level. Your income is calculated using your earnings from work, pensions (including the state pension), and assumed savings income. Then its topped up in the following manner:
   1. If youre single - If your weekly income (including pension) is less than £177.10, you will receive a top-up from pension credit up to this amount.
   2. If youre a couple - If your combined weekly income is less than £270.30, you will receive a top-up from pension credit to the combined income up to this amount.

2. Savings credit

   – It is basically a reward for the lower-income pensioners who have not managed to save a little extra income as their pension amount. If youve saved extra for retirement, you can get up to £15.71 per week (approximately £800 per year) in savings credit. The name is a little misleading because it considers not only how much money you have saved but also the income level you receive from your savings, as well as any additional pension pots and/or earnings from work or other sources.
   1. If youre single - You get 60p of savings credit for every £1 of weekly income between £153.70 and £173.75, up to a maximum of £14.04/week. However, it begins to taper off above those earnings, so for every £1 of income above £173.75/week, your pension credit is reduced by 40p.
   2. If youre a couple - You get 60p of savings credit for every £1 of income between £244.12 and £265.20 per week, up to a maximum of £15.71/week. However, it begins to taper off above those earnings, so for every £1 of income above £265.20/week, your pension credit is reduced by 40p.

   You may be eligible for a higher savings credit if you fall in the category of a carer, severely disabled, the responsibility of a child or a young person, or have savings or housing costs. In case you qualify for both guarantee credit and savings credit, you can be confident that your savings credit will not be reduced because savings credit is only reduced when you earn too much to qualify for any guarantee credit.

   Use the pension credit calculator to know how much you can claim

   https://www.gov.uk/pension-credit-calculator#before-you-start

How to claim pension credit?

You can get ready and start your application up to four months before reaching the State Pension age.

You can apply at any time after reaching the State Pension age, but you can only go three months back. This means that if you were eligible at the time, you could receive up to three months of Pension Credit in your first payment.

Information you require at the time you apply for pension credit

If you need to apply for pension credit, you need the following information about you and your partner –

1. National insurance number
2. Details about any income, savings and investments
3. Details about any income, savings and investments on the date when you want to submit your application to any backdate (generally 3 months back or the date you attain the state pension page)

In case you want to apply by phone or post, you also need to provide your bank account details.

Apply by phone

Telephone: 0800 99 1234
Textphone: 0800 169 0133
Relay UK: 18001 then 0800 99 1234 (if you cant hear or talk on the phone)
Monday to Friday: 8AM to 6PM

You can also use a video relay service, but you need to check that whether you are eligible for the same or not.

Note- It might be possible that applying through phone may take time due to Covid-19.

Apply by post

To apply by post, print and fill out the pension credit claim form or request a form by calling the claim line.

Send your claim form to the Pension Service or get it done for you.

The Pension Service 8
Post Handling Site B
Wolverhampton
WV99 1AN

Also See: UK State Pension Entitlements for Directors: Am I Eligible?

If you disagree with the decision

If you don’t agree with the decision, you have the right to appeal a decision on your Pension Credit claim. This is known as requesting mandatory reconsideration.

In case you have any query or want specialist advice on "Pension credit", kindly call us on 03330886686, or you can also e-mail us at enquiry@dnsaccountants.co.uk

About the author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.