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Pension Credit is the main means-tested benefit for pensioners.

For people reaching State Pension age before April 2016, it has two parts:

  • Guarantee Credit, which provides financial help for people aged over the “qualifying age” for Pension Credit (linked to the State Pension age) whose income is below a set amount; and
  • Savings Credit is an extra amount for people aged 65 or over, who have made some provision for their retirement (such as savings, or a second pension) (State Pension Credit Act 2002, s 2-3).

Savings Credit was removed for people reaching State Pension age from 6 April 2016, as part of the Coalition Government’s State Pension reforms. The rationale was that, because the new State Pension would be set above the basic level of means-tested support, there would “no longer be a need for a complex savings reward under single tier.” (Cm 8528, Jan 2018, ch 2).

The qualifying age for Pension Credit is the State Pension age (State Pension Credit Act 2002, s 1; Pensions Act 1995, Sch 4). Whereas in the past, ‘mixed age couples’ (with one above and one below qualifying age) could opt to claim Pension Credit (rather than a working age benefit), from 15 May 2019, both need to have done so. There is transitional protection for mixed age couples entitled to Pension Credit or Housing Benefit for People over Pension Credit qualifying age at the date of change, while they continue to be entitled to either benefit (SI 2019/37; Gov.UK -Pension Credit/eligibility).

In February 2020, there were 1,532,500 claimants of Pension Credit in Great Britain and 1,797,000 beneficiaries (i.e. including partners) (DWP, stat-explore). In 2017/18, some 6 out of 10 of those entitled to Pension Credit, claimed it. Up to £2.5 billion of available Pension Credit went unclaimed. On average, this amounted to around £2,000 per year for each family entitled to receive Pension Credit but not claiming (DWP, Income-Related Benefits: Estimates of Take-up, Feb 2020).

This note aims to give an overview of the main issues currently raised in connection with Pension Credit. For more on the background, see Library Briefing Paper CBP-01439 Pension Credit – background (2011) and 02/19 The State Pension Credit Bill [HL] (March 2002).

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