What is pension credit?

If you’re on a low income after retirement, there are benefits available that can help you maintain a comfortable standard of living. One of the main ones is pension credit. You may qualify for this benefit automatically if your income is below a certain level once you’ve reached state pension age. Around 1.5 million pensioners throughout the UK receive pension credit – but around 2 in 5 eligible pensioners don’t claim what they’re entitled to. Even if you reached state pension age a few years ago, it’s not too late to start claiming. We explain what pension credit is, how much you could get and how to apply.

What is pension credit?

Pension credit is a means-tested weekly benefit for people who are over state pension age and on low incomes. Eligibility is based on how much money you have coming in. If you are eligible, it can offer a much-needed top-up to your weekly pension income. But importantly, you don’t receive it automatically. If you want to receive it, you must put in an application.

How does pension credit work?

Pension credit is split into two parts: guarantee credit and savings credit. Some people receive both, but others only qualify for one of the two. In both cases, you’ll only qualify if your income isn’t too high.

What is guarantee credit?

This is the main type of pension credit. It tops up your weekly income to a guaranteed minimum amount.

What is savings credit?

This is usually only available to people who reached state pension age before 6 April 2016. It rewards those who have been proactive about saving for retirement, and have a modest income via a savings account or pension, by paying an additional benefit.

How much is pension credit worth?

According to government statistics, the average pension credit payment is more than £59 a week – that’s more than £3,000 a year. How much each person will receive depends on their specific level of income and whether they qualify for one or both types of pension credit.

Guarantee credit

Let’s start with guarantee credit. As of the 2021/22 tax year, this tops up your weekly income to:

• £177.10 if you’re single
• £270.30 if you’re in a couple that lives together (based on your joint weekly income)

If you earn less than these amounts, you’ll receive enough benefit to lift your income to these levels.

Example: If you’re single and your weekly income from other sources is £125, you’ll be eligible for a guarantee credit top-up of £52.10.

Savings credit

If you reached state pension age before 6 April 2016 and have saved some money for retirement, you may also qualify for the savings credit part of pension credit. If you qualify, this entitles you to a maximum weekly payment of:

• £14.04 if you’re single
• £15.71 if you’re in a couple that lives together

The eligibility criteria to receive savings credit are a bit complicated, as we’ll explain below.

Who is entitled to pension credit?

Guarantee credit

The criteria for entitlement to guarantee credit are fairly straightforward. You must:

• Have reached state pension age (to qualify as a couple, you must both have reached state pension age, or one of you must be getting housing benefit for people over state pension age. As of May 2019, new applicants can’t usually claim pension credit if only one of you has reached state pension age)
• Earn less than the income thresholds stated above, based on income from the state pension, other pensions, employment, savings above a certain level and some other benefits
• Live in the UK

Savings credit

The criteria to qualify for savings credit are a little more complicated.

Admittedly the first part is straightforward. It’s only available to people who reached state pension age before 6 April 2016. This can include couples where one member of the couple reached state pension age before this date. And, as with guarantee credit, you must living in the UK.

In addition to these basic criteria, you must have made some provisions for your retirement, such as a pension (other than the state pension) or savings.

A bit counterintuitively, given these are benefits aimed at those on low incomes, there are also minimum thresholds on how much income you must earn to qualify for savings credit. As of the 2021/22 tax year, these minimum thresholds are £153.70 a week for single people and £244.12 for couples.

Exactly how much of the maximum benefit (£14.04 a week for single people and £15.71 for couples) you might qualify for depends on how much you earn above these minimum thresholds. The maths can be a bit complicated so, if you’re not already receiving pensions credit but think you might be entitled to savings credit, your best bet is simply to try applying and find out how much you might be owed. Remember that you’ll only be eligible if you (or in some cases your partner) reached state pension age before 6 April 2016.

How do I know exactly what pension credit I qualify for?

If you want to get a sense of how much pension credit you might qualify for before you apply, you can use the government’s pension credit calculator to check if you’re eligible and an estimate of how much you might get.

How do I apply for pension credit?

It just takes 2 steps:

1. Check your state pension age using the government’s state pension calculator. You can apply up to 4 months before your state pension age, or at any point thereafter.
2. If you’ve already reached state pension age and there are no children or young people included in your application, you can apply online on the gov.uk website. Otherwise you can apply by post, or a phone call will do the trick. Call 0800 99 1234. Make sure you have the following details handy for yourself and your partner (if applicable).
   • National Insurance number
   • Information about your income, pensions, investments and savings. If you’re backdating your payments (for up to 3 months), you’ll need information for the period of backdating too
   • If you’re applying by phone or post you’ll also need your bank account details

How is pension credit paid?

Payments of pension credit usually go directly into your bank or building society account. Payments can be made weekly, fortnightly or four-weekly.

If you are unable to act for yourself, the payments can instead be made to someone you have given power of attorney or another official appointee.

Can I ever get more than the basic amount of pension credit?

Yes, there are a few circumstances in which you might qualify for some additional allowances on top of guarantee credit. These amounts are all correct as of the 2021/22 tax year:

• If you have a severe disability and receive certain disability benefits (such as attendance allowance, or the armed forces independence payment) you could get an extra £67.30 a week.
• If you care for another adult and are entitled to carer’s allowance, you could get an extra £37.70 a week.
• If you’re responsible for children or young people that normally live with you, you may be able to get an additional £54.60 a week for every child or young person you look after. This is increased to £65.10 a week for the first child if they were born before 6 April 2017.
• If you have housing costs, you may be able to get an amount to help you with things such as ground rent or services charges.

I’m state pension age, but my partner isn’t. Can we claim pension credit?

Typically, no. As of 15 May 2019, couples can only claim pension credit when both partners have reached state pension age. There may be an exception if one member of the couple is receiving housing benefit for people over state pension age.

If you don’t meet the pension credit eligibility criteria as a couple, you may be able to claim universal credit instead. However, this is likely to be worth less.

If you are a couple where one partner is below state pension age, but were already receiving pension credit before May 2019, this will be unaffected as long as other circumstances don’t change.

Does the money I have in savings affect my eligibility for pension credit?

It depends on the level of savings. If you have £10,000 or less in savings and investments, your pension credit will be unaffected.

If you have more than £10,000, every £500 over £10,000 will be treated as the equivalent of £1 income a week. For example, if you have £12,000 in savings, this will count as £4 income a week.

What happens if my circumstances change?

If your (or your partner’s) personal or financial circumstances change in a way that could affect your pension credit entitlement, you must tell the Pension Service by calling 0800 731 0469 or letting them know by post (the address is on the letters you get about pension credit).

Changes to financial circumstances include:

• Changes to housing costs, for example ground rent or service charges
• Changes to benefits that anyone living in your home gets; this can include getting a new benefit or a benefit being stopped
• Changes to occupational or personal pensions – for example, starting to get a new pension or taking a lump sum out of your pension pot
• Other income changes; for example, foreign pensions, Working Tax Credits, or savings or investment income
• Changes to the value of your savings and investments; if they fall below or rise above a certain level, this can affect your pension credit entitlement

Changes to personal circumstances include:

• Starting or stopping work
• Moving house
• Going into a hospital or care home
• Starting or stopping living with a partner
• Other people moving in or out of your house
• Changing your name
• Changes to your bank account details
• Going abroad; for example, on holiday (due to the rules on how long you can be away overseas and still receive pension credit)
• Changes to your immigration status if you’re not a British citizen

Can I claim pension credit if I move abroad?

It depends how long you move abroad for. If you move abroad permanently, you cannot get pension credit. If your move is only temporary, you can continue to receive payments for the following periods:

• For 4 weeks, provided the absence is not expected to exceed this (i.e. you intend to return within this period at the point of departure)
• For 8 weeks, provided the absence is not expected to exceed this and is in connection with the death of your partner or another close relative that you usually live with
• For 26 weeks, provided the absence is not expected to exceed this and is purely in connection with medical treatment for you, your partner or your child

Bottom line

If you’re eligible, it’s well worth applying for pension credit. Not only could it give a welcome boost to your retirement income, but receiving it automatically qualifies you for a heap of other valuable benefits too. So if you’ve reached state pension age and are struggling to make ends meet, don’t hesitate to apply.

Frequently asked questions

• When can I claim pension credit?

  You can receive pension credit once you reach state pension age. You can start your application up to 4 months before you reach state pension age, or at any time thereafter.

• Who can I claim pension credit for?

  You can claim pension credit on behalf of yourself and, if they’re eligible, a spouse or a partner that you live with. It’s also possible for a nominated appointee to claim pension credit on behalf of someone that is unable to manage their own affairs because of severe disability or mental incapacity.

• Can pension credit be backdated?

  Yes, but only for up to 3 months, or from the point you reached state pension age if this was less than 3 months ago.

• Will I still get pension credit if I go into a care home?

  In most cases, yes, your pension credit entitlement will be calculated as if you were still living at home. However, if you are in a couple and one member moves permanently into a care home, from that point you will be treated as individuals for the purposes of pension credit.

• Do you pay council tax if you are on pension credit?

  It depends on your specific circumstances. If you receive the guarantee part of pension credit, you may get your council tax paid in full. If you live with any adults that are not dependent on you, the discount may be smaller. And if you only receive the savings credit part pension credit, you may be eligible for some discount, but typically not as much as with guarantee credit.

• How often is pension credit paid?

  You can choose to receive pension credit payments weekly, fortnightly or four-weekly.

• Can I get pension credit if I have never worked?

  Yes. Regardless of your current or former employment status, and even if you have made no national insurance contributions, you can claim pension credit as long as you meet the eligibility criteria.

• What counts as a couple for the purposes of claiming pension credit?

  You are regarded as a couple if you are in a relationship and live together. You don’t necessarily have to be married or in a civil partnership. If you are in a couple, you must include your partner in your pension credit application.