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Pension Credit, a new non taxable Social Security benefit, became payable from 6 October 2003.

People over 60 who are not in full time work (including men who are not yet eligible to draw the state pension) may be entitled to Pension Credit, but this must be applied for on 0800 99 1234 or by paper application form.  An application can only be backdated by 3 months, although until October 2004 that time limit was 12 months.

The Department for Work and Pensions (DPW) is responsible for publicising this, but some 1.2 million potential recipients have not claimed.

It appears that the application is all dealt with in a single telephone call, after which the DPW forward a completed form for signature and advise the amount payable without detailing the calculation for the claimant to understand and check.

Further details are available from the DPW website, but the purpose of this page is to give a general understanding of the new benefit.  It is not a comprehensive explanation which would refer to all the special regulations which apply, amongst others, to part time firemen over 60, or pensioners living in tents - yes the legislation does give special mention to such people if you know any!

There may be two parts to a pension credit, the guarantee credit and the savings credit, although these will not normally be identified to the recipient.

The guarantee credit replaces the Minimum Income Guarantee and will top up a single claimants income to £105.45 per week (£102.10 till 5 April 2004) and a couples income to £160.95 per week (£155.80 till 5 April 2004).

Income includes any state or occupational pension, any other pension or annuity, any earnings and Working Tax Credit, any maintenance received from a former spouse even if paid voluntarily, and some other Social Security benefits.  Exempt social security benefits are Housing Benefit, Council Tax Benefit, lump sum Bereavement Payments, Attendance Allowance and Disability Living Allowance.

Mortgage interest, ground rents and service charges, or a tent dwellers pitch fees paid by owner occupiers, not included in the Housing Benefit scheme may increase the guaranteed minimum income.

There is a general disregard of the first £5 per week of a single person's earnings and of £10 per week for a couple.

Investment income itself is ignored but any 'capital' over £6,000 is treated as earning interest at the equivalent of 10.4%.  'Capital' does not include the value of a claimant's own dwelling or personal possessions (buy an antique), the surrender value of a life policy or the value of a funeral prepayment plan (another idea), but does include tax-exempt savings such as ISAs etc.

The savings credit is designed to provide a top up equal to 60% of the amount by which a claimant's income falls between £79.60 to £105.45 for a single claimant or £127.25 to £160.95 for a couple, thereafter reducing the maximum savings credit by 40% of the amount by which the claimants income exceeds £105.45 for a single claimant or £160.95 for a couple.

If you can understand that you are a genius!  We think it means that the Pension Credit is reduced by 40% of the amount by which the claimants income exceeds £79.60 for a single claimant or £127.25 for a couple.

Savings credit can only be claimed if the claimant, or his or her spouse or partner, is 65 or over.

Reminder - disclaimer applies. Please feedback your comments.  This page was last modified 18 October 2004.