House of Commons Library

Pension Credit - current issues

Published Friday, July 19, 2019

Looks at some of the issues currently raised in connection with Pension Credit - including the introduction of changes for 'mixed age couples'

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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 and Savings Credit. Guarantee Credit 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. 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 is rising in line with 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 2016/17, up to 1.3 million families who were entitled to receive Pension Credit did not claim the benefit. Up to £3.5 billion of available Pension Credit went unclaimed. On average, this amounted to around £2,500 per year for each family entitled to receive Pension Credit but not claiming (DWP, Income-related benefits: estimates of take-up for 2016-17 November 2018).

The BBC has announced that from June 2020, entitlement to free TV licences for the over-75s will be restricted to those in receipt of Pension Credit. The Office for Budget Responsibility (OBR) has concluded that this is likely to prompt a “material number of those not currently taking up [Pension Credit] to do so” (OBR, Fiscal risks report, 17 July 2019, Exec Summary para 38 and Box 5.1).

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; Roderick McInnes

Topic: Pensions

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