Pension Credits Explained – What You Need To Know

Knowing what pension options open to you early on is crucial to your retirement and long term financial planning. One key consideration of this planning is accessing pensions credits.

What Are Pensions Credits?

In short,  pensions credits are an income related benefit that are made up of two parts – guaranteed credit and savings credit.

Should your weekly income drop below £173.75 for single people, and £265.20 for couples, the guaranteed credit will top up your income and even if you have savings or a home you may still be eligible. Savings credit on the other hand is an extra payment for those people who saved some funds towards their retirement pot, for example a pension.

Please note that you may not be eligible for Savings Credit if you have reached State Pension age on or after the 6 April 2016. In addition you do not pay tax on Pension Credit.

What Will You Receive?

All those that are eligible for pensions credits will receive a flat rate, as outlined below:

• Single persons guaranteed credit per week:
  • Top up to £173.75 with up to £13.97 savings credit per week
• Couples guarantee credit per week:
  • Top up to £265.20 with up to £15.62 savings credit per week

In addition you may also be eligible to receive more you are a carer, severely disabled, responsible for a child or young person, or have certain housing costs. Using the HMRC Pension Credit calculator, you can work out exactly how much you might be eligible to receive.

If you begin to receive a guarantee pensions credit you may also qualify for other benefits such as Housing Benefit, Council Tax Reduction, Cold Weather Payments and help with the costs of NHS services. We would recommend the Check a benefits calculator to see if you’re eligible for anything else.All pensions credits will be paid into a designated bank account.

Eligibility For Pensions Credits

To access Pensions Credits you must live in England, Scotland or Wales and have reached State Pension age to qualify for Pension Credit.

If however you are in a couple, then you can start receiving Pension Credit if either you or your partner have:

• Have both reached State Pension age
• Or are receiving Housing Benefit for people over State Pension age

Your partner is defined as your husband, wife or civil partner (if you live with them) or someone else you live with as if you were married. For those in Northern Ireland, you can access more official information regarding Pension Credit in Northern Ireland here.

If you already receiving Pension Credit and you are living in a single household, you will cease receiving Pension Credit if you begin to live with a partner who is under the state pension age but will be able to receive it again once they reach the national retirement age.

Savings Credit Explained

You can only begin to  access Savings Credit if either you or your partner, reached State Pension age before the 6 April 2016.

If you have been receiving Savings Credit since 6 April 2016 or before, you will  continue to get it so long as there are no breaks in your entitlement.

Please note that if for whatever reason you stop being eligible for Savings Credit, you will be unable to get it again.

Pensions Credits For Those Responsible For A Child Or Young Persons

If you’re responsible for a child or young person, you will be eligible for additional pensions credits – this is known as the ‘child addition’ credit and is a commonly accessed financial benefit.

To access the Child Addition Credit, the child or young person must normally live with you and be under the age of 20.

If however they are 16 or over and under 20 years of age, they must be in or accepted into the following in order for the payments to be made:

• Approved training, including Foundation Apprenticeships
• GCSEs, A-Levels or other similar qualifications
• All education must be for more than 12 hours a week

Please note that if you receive Tax Credits, you will not be eligible for the Child Addition Credit.

Working Out Your Income Prior To An Application

When you begin you application for Pension Credit, your income is worked out as part of the process and includes:

• State Pension
• Other pensions
• The majority of social security benefits, for example a Carer’s Allowance
• Personal savings and investments over £10,000
• All other earnings

If you are entitled to a private or workplace pension, the amount you’d expect to receive is calculated as an income from the date that you were first able to get it, if you had claimed it.

You will not get the benefit of deferring your State Pension if you or your partner are on Pension Credit, for example you will not build up extra State Pension or a lump sum for deferring your State Pension. When working out if you can receive a Pension Credit, the income you’d get from your State Pension is included whether you’re claiming it or not.

Please also note that the income calculation does not include:

• Attendance Allowance
• Christmas Bonus
• Disability Living Allowance
• Council Tax Reduction
• Housing Benefit
• Personal Independence Payment

In addition if you are registered for Self Assessment, you must tell the Pension Service how much Income Tax you expect to pay for the current tax year – this affects how much Pension Credit you’ll get.

It is also important to note that if you leave the United Kingdom, your entitlement will be affected and you cannot receive Pension Credit if you permanently leave the country.

How To Claim Pension Credits

The process is relatively straight forward and you can start your application up to 4 months before you reach the State Pension age.

You can also claim for any time period after you reach State Pension age, but your claim can only be backdated for 3 months. To apply you will need your:

• National Insurance number
• Full information about your income, savings and investments
• Your bank account details, if you’re applying by phone or by post

To apply online please click here to access the application portal.