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Pension Credit - 2017 onwards

Published Friday, November 17, 2017

Looks at some of the issues currently raised in connection with Pension Credit

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Pension Credit is the main means-tested benefit for pensioners. For people reaching State Pension age before April 2016, it had two parts: the Guarantee Credit and Savings Credit. Guarantee Credit provides financial help for people aged over the “qualifying age” for Pension Credit (linked to the State Pension age for women) whose income is below a set amount. 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, January 2018, ch 2).

The qualifying age is linked to the State Pension age for women, and so is rising. Whereas at present, ‘mixed age couples’ (with one above and one below qualifying age) can opt to claim Pension Credit rather than a working age benefit, in future both will need to have done so. In September 2016, the Government said it expected this rule – which is linked to the roll-out of Universal Credit - to apply from June 2018 (EM to SI 2016/931).

In May 2017, there were 1.8 million claimants of Pension Credit. The number of claimants has declined since 2010, in large part due to the gradual increase in the female State Pension Age (which is also the age of eligibility for Guarantee Credit component of Pension Credit for both sexes).

In 2015/16, 6 out of 10 of those entitled to Pension Credit claimed it. Take-up by expenditure was 67%. Up to 1.4 million families entitled did not claim it and up to £3.3 billion went unclaimed. On average, this amounted to around £2,000 per year for each family entitled to Pension Credit but not claiming. Take up of Guarantee Credit continued to be higher than for Savings Credit (65% compared to 49%) but had decreased since 2012/13, when it was 70% (DWP, Income-related benefits: estimates of take-up for 2015-16 September 2017).

This briefing paper 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).

Commons Briefing papers CBP-8135

Authors: Djuna Thurley; Richard Keen

Topic: Pensions

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