The cost of living in the UK has become a strain for most households in 2022, but if you’re part of the close to 11 million people over 65, and you’re on a low income, you may be struggling with monthly outgoings more than most.
The current full state pension is £185.15 per week. This is calculated on a person paying into the National Insurance pot for 35 years, which works out at £5.29 per year (£5.29 x 35years = £185.15).
However, if you have not paid into the National Insurance pot for 35 years, your state pension may look a little less affluent!
For many their state pension is the only income they receive once retiring from employment. Even at £185.15 per week, that’s still only an annual income of £9627.80 per year. The average annual wage in the UK in 2022 is £29,000, this is more than three times the full state pension. What pensioners in our country are expected to survive on, especially if they have less years paying into the National Insurance pot, in a current cost of living crisis, seems to fall tragically short of requirement.
This is when you should explore pension credit and the added benefits you can receive.
What is Pension Credit?
Pension credit is a monthly benefit given by the Pension Service that can top up your income once you’ve reached state pension age (you can calculate your state pension age on the Government’s website). Like most benefits, pension credit is means tested, you can still be working, but any income will be taken into account when applying. Pension credit is separate from your state pension, and you don’t need to have paid national insurance to receive it.
Pension credit is separated into two parts, Guarantee Credit and Savings Credit. It is possible to receive both parts of the pension credit, but many people will receive just one.
Guarantee Credit:
Guarantee credit is the minimum guaranteed amount those who are eligible for pension credit will receive. This is the main part of the pension credit given to top up your weekly income. Currently (2022/23 level) the calculated minimum income for a single person is £182.60, and £278.70 for a couple both over state pension age. If your weekly income is below these amounts, guarantee credit will top up this amount to meet the calculated minimum income.
For example; if your state pension is based on 20 years paying National Insurance, your weekly income would be £105.80. Therefore the guarantee credit will top up your weekly income by £76.80.**
Savings Credit:
Savings credit is available to those who reached state pension age before April 2016 (this is 65 for men and 63 for women). It provides an extra income for those who saved a small amount to help fund their retirement, this includes savings and work and private pensions. However, savings credit is being phased out, if you apply and are eligible to receive it, you will continue to receive it for as long as you meet the required criteria. But once phased out, those who were eligible but hadn’t applied, will not be able to apply for it. Savings credit is up to £14.48 per week if you’re single and £16.20 per week for a couple. To be eligible for this part of the pension credit you must earn above £158.47 per week if you’re single, or £251.70 per week for a couple.
There are additional criteria that would entitle you to extra pension credit, such as disability and being a carer, this would need to be added to your application to provide a weekly amount.
If you do qualify to receive pension credit, even if it’s just a small amount, you will also be able to claim other help, such as housing benefit, mortgage interest support, discount on your council tax, help with heating costs through Government schemes and support for NHS dental treatment. These additional benefits could save people 1000’s of pounds each year!
So why is it that of the 2.5 million people who qualify for pension credit in the UK, nearly 1 million of them aren’t aware or asking how do I claim pension credit?
It’s not automatic. Even though millions of people are entitled to pension credit, it seems the Government has not provided information to people at retirement age to suggest or prompt them to apply. By raising awareness of the pension credit available, hopefully more people will apply and will be more financially stable in the current climate, especially with the additional help and benefits they can receive.
Age UK, the UK’s leading charity for supporting people in later life, believe there could be several factors creating a barrier between older people and claiming the money they are entitled to, such as:
- Feeling a burden to the system. Many older people are proud and the current ‘crisis’ the UK is experiencing, such as high unemployment and low income for young people and families, may influence them to be ‘ok’ in their own situation and not reach out for help and financial support.
- Communication barriers. Unfortunately, many systems for claiming financial help are now online and it can be an overwhelming process for some who are older to navigate online forms and feel confident that all the information is received by someone at the other end. Similarly speaking on the phone can also be a struggle, especially if someone is hard of hearing. These communication breakdowns are difficult to rectify, especially in recent years due to the Coronavirus restrictions on being able to meet and help people face to face.
It’s therefore incredibly important for all members of our society to be aware of such financial aid for older people in our communities, and take the time to ask family, friends and neighbours if they’re doing ok, and if they are aware of the help available to them.
How do I claim pension credit?
Applying for pension credit is relatively easy and can take just minutes. You can choose how you wish to apply by:
Phone: 0800 99 1234
Online: Visit https://www.gov.uk/pension-credit/how-to-claim
Post: Print out the Pension Credit form here and post to: The Pension Service 8, Post Handling Site B, Wolverhampton, WV99 1AN.
First you must know when you will reach state pension age (click here to visit the Government’s website). Once you have this information, you are able to apply up to 4 months prior to reaching state pension age. You can apply any time after you reach state pension age, however payments will only be able to be backdated by 3 months and you will receive this as part of your first pension credit payment.
Whichever route you use to apply, phone, online or by post, you will need to have the following information about yourself and (where applicable) your partner:
- National Insurance Number.
- Any monthly income, savings and investments you have.
- Any monthly income, savings and investments you have relating to any of the three applicable months you can backdate the pension credit to if applying after reaching state pension age.
- Information on any housing costs
- Bank account details.
Once your application has been processed and you have been accepted for pension credit, the calculated amount (plus any backdated money) will be paid directly into your bank account every 4 weeks. Before you receive your first payment, you will receive a statement outlining how your pension credit has been calculated, a date of when you will receive your payment and how much you will receive.
How do I claim pension credit if my application was refused or the amount is incorrect?
If when you receive this statement, or when payment is received, you feel the amount is incorrect, or you have been refused pension credit, you will have one month to raise a mandatory reconsideration. This can be done by writing a letter to the Pension Service, which must explain why you are challenging the decision made and must include evidence to support your challenge. You can gain help completing the form and raising a mandatory reconsideration by speaking to Citizens Advice or Age UK.
If you are currently struggling with the cost of living, you can find different government schemes all aimed to help individuals, couples and families. There’s a full list of useful benefits and tools at Citizens Advice, or you can visit the Government’s website to see if you qualify for Universal Credit.
Here at Resolver we have lots of helpful advice at hand such as how to make your home more energy efficient to reduce your bills, and how to get help paying your energy bills. And as ever, if you feel you have been treated unfairly or have a complaint you would like to raise with a company, let us help by managing your complaint directly at resolver.co.uk.
**Please note examples are given as a guide and only by completing the Government’s Pension Credit application will an amount of credit be guaranteed.