Sorting pension credits – my strategic and tactical solutions.

We’ve been learning this week how this state and its citizens can work together to provide humanitarian aid where and when it is needed. Tax-payers agree to offer free accommodation to refugees and are rewarded for their expense by our Treasury, spreading the cost to general taxation. I haven’t heard anyone consider this a poor use of public funds, we accept that the public purse can be used where hardship is proven.

There are other groups whose circumstances deserve special treatment. One of them is the poor pensioner whose income is dependent on the state. Some will argue that these are feckless individuals who are vulnerable of their own making, this view was prevalent in previous centuries where we had poor houses that put the elderly destitute to work, keeping them in conditions where life was mean brutish and short.

Nowadays, we are not so explicit, but the elderly poor  are still with us. To that end we have pledged to upgrade the state pension by introducing a triple-lock and by offering those who do not qualify for the full (but relatively meagre) state pension, top-ups via “pension credits”.

But this year, when it became clear that the triple-lock would mean an increase in the state pension of something approaching double digits, the Chancellor capped the increase at 3.1%, resulting in a real loss of income to pensioners of between 5 and 8%. Some argue that the dependency of those on minimum incomes on the items that constitute the inflation index, means they are even more vulnerable to real pay-cuts than richer people, for whom “essential” spend is less part of their budgets. The bigger point is that those who have more, have a buffer which they can fall back on; those on the bread line – may literally stand in line at the food bank.

At such a time we expect exceptional measures from the Treasury to target income to those most in need. This has been done by increasing payments under universal credit during the worst of the pandemic and previously by increasing winter fuel allowances and other such benefits.

Take pension credit….

Pension credit is a tax-free, means-tested benefit aimed at retired people on low incomes and can be worth £1,000s a year. Plus, if you claim it you can access a whole raft of other benefits including council tax discounts and free TV licences for over-75s.

A long-term problem and strategic solution

However, around 850,000 eligible households don’t claim – often because they don’t know they can or that they need to. 

The problem with getting old, is that claiming benefits like pension credit gets harder. Now is a good time to get that sorted. We have to be realistic, many of the claims are too small to make much of a difference, but we need to be moving away from a “claims-based” system to one where benefits are paid automatically because we have real-time information on the finances of the elderly.

We know much more about the elderly poor than we used to, but we don’t seem to have focussed on their needs, despite numerous reports from the likes of the Rowntree Foundation, Age Concern and Age UK. Infact – gerontologists such as Debora Price, tell me that the data we hold on our ageing population is as good as any nation in the world. We have world class thinkers such as Gareth Morgan who specialise in providing modelling on how state and private benefits integrate. The DWP has a resource to call on to get this fixed!

So a practical step we can take right now, in conjunction with work being done on social care for the elderly, is to find out how we can identify and target areas where non-claimants are suffering hardship because they haven’t got the capacity to claim. This can be the kind of state and private partnership which works as well in pensions auto-enrolment for instance) as it does in housing.

This won’t be a quick fix. It looks like  a three to five year project , but if we initiate it today, it could be provide a systemic improvement that would make us as proud of pensioner benefits as we are of the data we hold.

A current crisis and a tactical solution

In the meantime, might it not be time to incentivise claiming pension credit by making it more valuable, especially in this year where hardship looks like being most intense?

If the Treasury feels unable to provide a blanket increase to all entitle to the State Pension, might not a bonus payment be made available to those eligible for pension credit? Might it at least to cover this year’s shortfall between the increase in the state pension and the pensioner’s cost of living?

What follow is taken from the MSE website.

What is pension credit?

Pension credit is a means-tested benefit aimed at people over state pension age offering a top-up to their income. It forms part of a range of benefits available to older people in need of help.

It’s made up of two parts, and while some people get both, many can qualify for just one of the two:

  • Guarantee credit – this is the main part of pension credit, giving you a top-up of your weekly income to a minimum guaranteed level. This minimum standard guarantee level for 2021/22 is £177.10 if you’re single, and £270.30 if you’re in a couple. See below for all the details on eligibility.

  • Savings credit – for those who reached state pension age before April 2016, there’s an extra boost available if you’ve made provision for your retirement via savings, work or a private pension. This gives you up to £14.04 per week if you’re single, and £15.71 if you’re in a couple. To qualify you’ve got to earn above a threshold amount of £153.70 if you’re single and £244.12 if you’re in a couple. See below for a full explanation of savings credit criteria and how you might still qualify if you reached state pension age after April 2016.

More than three million households are eligible for pension credit, but it’s estimated that around 850,000 don’t claim – in many cases because they don’t realise they could be entitled to it.

Do I qualify for pension credit

To qualify for pension credit you must:

  • Live in the UK – England, Scotland, Wales or Northern Ireland.
  • Have reached state pension age.
  • If you’re in a couple, you’ll BOTH need to have reached state pension age. You don’t have to be married or in a civil partnership, you’re considered a couple if you live together. For couples, one partner claims and gives income and savings details for both partners.

 Extra criteria for savings credit: 

  • To qualify for savings element as well (if you’re making a new claim) you also need to have reached 65 if you’re a man, and 63 if you’re a woman before 6 April 2016 – the state pension ages back then.
  • However, if you’re part of a couple and just one of you satisfies ALL of these conditions, you could still qualify for savings credit as a couple.
    You or your partner must:

    • Have been entitled to savings credit immediately before 6 April 2016
    • Have been awarded savings credit with effect from a day before 6 April 2016
    • Have remained continuously entitled to savings credit at all times since the beginning of 6 April 2016.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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1 Response to Sorting pension credits – my strategic and tactical solutions.

  1. Richard Chilton says:

    Getting more people to claim Pension Credit could be quite a challenge. The numbers of newly eligible people have been going down over recent years, principally as a result of changes in the state pension. The increases in the proportion of women in the workforce have added to this trend.

    Newly eligible people for Pension Credit will now often be those who came to the UK later in their working lives, have English as a second language, have been on low pay and have low financial capability. They may normally just talk to others of a similar background. Finding and helping them may not be easy.

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