Pension Credit is the principal element of the UK welfare system for people of pension age. It is intended to supplement the UK State Pension, or to replace it (for example, if the claimant did not meet the conditions to claim a State Pension). It was introduced in the UK in 2003 by Gordon Brown, then Chancellor of the Exchequer. It has been subject to a number of changes over its existence, but has the core aim of lifting retired people of limited means out of poverty.
Eligibility may be estimated on a government website.[1]
The scheme was introduced to replace the Minimum Income Guarantee, which had been introduced in 1997, also by Gordon Brown. This combined the existing applicable amount (of benefit) in Income Support, together with the Pensioner Premium, which was itself substantially increased; these changes gave the impression of a new, more generous benefit package aimed at pensioners.[2]
Pension Credit has two elements:
The values of Guarantee Credit and Savings Credit are automatically uprated each year, in line with inflation, as are the basic State Pension and Second State Pension (S2P). However, they are uprated by different inflation measures:
The net, deliberate, effect of these differences is to make the total combined impact gradually converge, over about 40 years, to an eventual situation where the total benefit is around £170 a week, whatever an individual's circumstance. Consequently, the Coalition government proposed replacing this complex system with a single flat-rate pension of about £170 per week.
Savings Credit, which would be abolished by the flat-rate pension policy, is currently only claimed by around 1% of eligible individuals, and few people of eligible age are aware of its existence. As an interim measure, the Coalition government changed the uprating system, so that higher levels of income would be obtained automatically, instead of via Savings Credit:
Anyone who was in receipt of the Guarantee Credit part of Pension Credit was also eligible for full Council Tax Benefit, which covered the cost of their Council Tax bill. Whilst Council Tax Benefit itself was abolished in 2013, a new system of benefit entitlement, known as Council Tax Reductions[4] (marketed by many councils as Council Tax Support) was introduced. However, for pensioners in particular, the Council Tax rate must be set to zero if they are in receipt of Guarantee Credit, maintaining the same level of support.
Anyone who was in receipt of the Guarantee Credit part of Pension Credit was also eligible for full Housing Benefit. This could be a significant amount, ensuring that a retired person in this position has their rent paid in full. However, the Coalition government proposed to change this rule in a substantial manner by abolishing Housing Benefit. It was intended that from October 2014, Pension Credit would gain a new core element for Housing costs comparable with the Housing Element of Universal Credit, for working-age benefit claimants. The Housing element would be based on Local Housing Allowance, in a similar manner to Housing Benefit, but payments would be incorporated within Pension Credit, rather than being a separate benefit claimed from the local council. It is not clear when, or if, this plan will be implemented.
As with Universal Credit, there is an additional Element available for people suffering from certain levels of disability. The additional amount is called Extra Amount for Severe Disability and amounts to £53.65 per week (in 2010/11 prices); as with most elements of Pension Credit, it is added to the core amount, and the whole thing is paid as a single weekly lump sum.
The Qualification criteria are relatively simple – the applicant, and/or their partner must be in receipt of:
The rules are complex and there are exceptions; for example, no-one in the household must be claiming Carer's allowance for looking after the disabled individual (otherwise they would be being paid twice for the same thing). The government encourages people interested in claiming this element to contact the Pension, Disability and Carers Service via Gov.uk, or an agency with expertise in benefits, such as the Citizens Advice Bureau, or a respected charity like Age UK.
According to Age UK more than a third of those entitled to claim Pension Credit fail to do so based on latest estimates of take-up from 2009/10. Up to 1.6 million of pensioners on average were missing out on an extra £1,700 a year.[5]