What Is Pension Credit?

Pension Credit is one of the most valuable benefits available to people in later life, and also one of the most under-claimed. Hundreds of thousands of pensioners who are entitled to it never apply, often because they assume their savings rule them out or that the amount would be too small to bother with. Both assumptions are frequently wrong. This guide explains what Pension Credit is, who can get it, and why even a small award can be worth far more than it first appears. This is general information, not financial or legal advice.

What it is

Pension Credit is a means-tested benefit, paid by the Department for Work and Pensions, that tops up the weekly income of people over State Pension age who are on a low income. Its purpose is to make sure pensioners have a minimum level of income to live on, regardless of how much State Pension they receive.

It is separate from the State Pension, although the two work together. You can receive Pension Credit on top of your State Pension, and getting it does not reduce your State Pension in any way. It is also separate from your savings: having money in the bank or a small private pension does not automatically disqualify you, though it is taken into account.

Pension Credit comes in two parts, which can be awarded together or separately depending on your circumstances.

The single biggest myth about Pension Credit is that savings rule you out. They do not. Many people with modest savings still qualify, and never find out because they never check.

The two parts of Pension Credit

Understanding the two elements is the key to understanding the benefit.

Guarantee Credit is the main part. It tops your weekly income up to a guaranteed minimum level set by the government, with higher amounts for couples and for people with certain extra needs, such as a disability or caring responsibilities. If your income is below the threshold, Guarantee Credit makes up the difference.

Savings Credit is an extra payment for some people who reached State Pension age before 6 April 2016 and who saved a little towards their retirement. It is a smaller, additional reward for having some modest income or savings of your own. Because of the date rule, it is gradually being phased out, but those already receiving it can keep it.

You may qualify for one part, the other, or both.

Who qualifies

Eligibility rests on a few main conditions:

• Age: you must have reached State Pension age. To check yours, see our guide on the State Pension, which explains how the qualifying age has changed.
• Where you live: you must live in Great Britain (England, Scotland or Wales).
• Income: Pension Credit is means-tested, so your income is assessed against the relevant threshold. Income includes the State Pension, other pensions and certain benefits.
• Couples: if you have a partner, you usually both need to have reached State Pension age to claim, and your incomes are assessed together.

Savings are considered, but there is no fixed savings cut-off that automatically excludes you. A certain amount of savings is ignored, and only an assumed income from savings above that level is counted. This is exactly why checking is so important: the rules are more generous than many people expect.

What it is worth, and the extra help it unlocks

The cash top-up itself can be significant, but the real value of Pension Credit often lies in what it unlocks. Because it is a passport benefit, receiving even a few pounds a week can open the door to a range of further help, which may include:

• Help with rent through Housing Benefit, and a reduction in Council Tax.
• A free TV licence if you are aged 75 or over.
• Cold Weather Payments and, in some years, additional cost-of-living support.
• Help with NHS costs, such as dental treatment, glasses and travel to hospital.
• A Warm Home Discount on energy bills.

This is why dismissing a small award as "not worth it" can be a costly mistake. A modest weekly payment of Pension Credit can act as the key to hundreds or even thousands of pounds of additional support across the year.

How to claim

Claiming is more straightforward than many people fear, and help is available at every step. You can:

• Apply online through GOV.UK.
• Call the Pension Credit claim line to apply by phone, with someone to guide you through it.
• Apply by post if you prefer a paper form.

You can start a claim up to four months before you reach State Pension age, and once you are eligible, a claim can usually be backdated by up to three months, so it is worth applying promptly. Before you call, it helps to have details of your income, savings, investments and any pensions to hand.

If you are unsure whether you qualify, use the official Pension Credit calculator on GOV.UK, or get free help from Citizens Advice, Age UK or MoneyHelper. They can run the numbers, check your entitlement to other benefits too, and help you complete the claim. Pension Credit is not the only support worth checking in later life; people of all ages on a low income should also look at whether they qualify for help such as PIP if a health condition affects daily living.

The bottom line

Pension Credit tops up the income of people over State Pension age on a low income, through Guarantee Credit and, for some, Savings Credit. Crucially, it is means-tested but not as restrictive as people assume: modest savings rarely rule you out, and even a small award can unlock a free TV licence, help with rent and council tax, NHS costs and more. Hundreds of thousands miss out every year simply by not checking. If you, or an older relative, might be on a low income in retirement, use the GOV.UK calculator or call the claim line; it could be one of the most worthwhile phone calls you ever make.