More than a third of eligible households fail to claim Pension Credit - how to make sure you don’t miss out on up to £3,900 a year

The government is urging pensioners to check if they qualify for Pension Credit, which is worth £3,900 a year on average - but could be worth much more to certain households. 

It also unlocks access to other benefits, such as cold weather payments, help with NHS costs and extra cost of living payments.

The next cost of living payment is worth £300 and it can be claimed as long as you apply for Pension Credit (if you are eligible) by 10 December. 

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

Pension Credit is one of the most under-claimed and misunderstood benefits. According to official statistics released last month, up to 880,000 families who were entitled to receive the benefit did not claim, meaning up to £2.1 billion of available Pension Credit went unclaimed.

The figures from the Department for Work and Pensions (DWP) show that in the financial year 2019/2020, 66% of eligible households received the benefit. But for 2021/2022, this dipped to 63%.

Helen Morrissey, head of retirement analysis at the investment platform Hargreaves Lansdown, says the DWP data notes that the pandemic affected how information was gathered and this may have affected the results. But, she adds: "The fact remains that hundreds of thousands of people who are struggling in retirement are not getting the help they need."

However, a Freedom of Information request shows that recent efforts by the government to raise awareness about Pension Credit are starting to work - and in fact this week, it has signed up football legend Harry Redknapp to encourage pensioners to sign up for Pension Credit by 10 December to ensure they also do not miss out on the £300 additional cost of living payment. 

The number of Pension Credit claims awarded rose to 143,031 in 2022/23 compared to just 81,519 in 2021/22, according to figures obtained by the wealth manager Quilter.

Although the data is incomplete for 2023/24, the number of Pension Credit claims looks set to be higher than average this year too, as between April and September 2023, 71,590 claims were awarded.

Jon Greer, head of retirement policy at Quilter, comments: “What is clear is that major government-backed campaigns like the one mounted over the past couple of years can have a huge impact on awareness, and it is very encouraging to see so many more people being awarded with Pension Credit.

"Unfortunately, despite this increase, there will still be hundreds of thousands of pensioners able to claim but not doing so."

We explain what Pension Credit is, who can claim, and how much it’s worth.

What is Pension Credit?

Pension Credit rose 10.1% in April, in line with inflation. It helps boost what pensioners get in retirement by topping up their incomes to at least £201.05 a week if they’re single, or £306.85 for couples. These figures will go up in April 2024 following the Autumn Statement. 

It is separate from the state pension, and paid to people of state pension age on low incomes, even if they have savings, a personal or workplace pension, or own their own home.

It is made up of two parts: guarantee credit and savings credit. The former tops up your pension income to a certain level, and is available to those on low incomes. The latter is only available to those who reached state pension age before 6 April 2016 and had some money saved for retirement, for example in a personal or workplace pension.

Even if Pension Credit will only provide a small amount of money to you, it’s worth claiming as it means you will qualify for other benefits:

• Support for mortgage interest (SMI) if you own the property you live in
• Housing benefit if you rent the property you live in
• Council tax reduction
• A free TV licence if you’re aged 75 or over
• Help with NHS dental treatment, glasses and transport costs for hospital appointments
• Cold weather payments
• Warm home discount
• Christmas bonus (only for those who receive the guarantee element of Pension Credit)
• A discount on Royal Mail redirection service for those moving home
• £599 cost of living payment (part of which will be paid in autumn 2023 - between 31 October and 19 November - and then the rest in spring 2024)

How much is Pension Credit worth?

Pension Credit tops up a pensioner’s weekly income to £201.05 if they are single (or £10,454.60 a year) in the current tax year. For those with a partner, the joint weekly income is topped up to £306.85 per couple (£15,956.20 a year). 

But you may be entitled to extra amounts if you have other responsibilities and costs.

For those with a severe disability, a further £76.40 a week is available. You must get one of the following benefits to qualify:

• Attendance allowance
• The middle or highest rate from the care component of disability living allowance
• The daily living component of personal independence payment (PIP)
• Armed forces independence payment
• Daily living component of Adult Disability Payment (ADP) at the standard or enhanced rate

If you care for another adult, you could receive an extra £42.75 a week, provided you get carer’s allowance (or you’ve claimed carer’s allowance but are not being paid because you receive another benefit that pays a higher amount). If you and your partner have both claimed or are currently receiving the carer’s allowance, you can both receive this extra amount.

For those responsible for a child or young person, you could get a further £61.88 a week (which increases to £71.31 a week for the first child if they were born before 6 April 2017). The child or young person must normally live with you and be aged 19 or younger. If the child or young person is disabled, you may get another payment.

The final top up helps with housing costs. An extra payment may be made to cover ground rent if your home is leasehold, or to cover service charges.

The above payments are all known as "guarantee credit", and form one element of Pension Credit.

The other part of Pension Credit is savings credit, which is worth up to £15.94 a week if you’re single, or up to £17.84 if you have a partner.

Who is eligible for Pension Credit?

You must live in England, Scotland or Wales and have reached state pension age (currently 66) to be eligible for Pension Credit.

When applying for guarantee credit, your income is calculated; if you have a partner, your joint income will be calculated.

The DWP defines income as your state pension and other pensions (even if they’ve been deferred), earnings from a job or self-employment, and most benefits.

However, not all benefits are counted as income. Attendance allowance, child benefit, disability living allowance, personal independence payment, winter fuel allowance, housing benefit, council tax reduction and the Christmas bonus are excluded.

Your savings and investments are also taken into account, which includes shares and any property you own (apart from the home you live in). If you have £10,000 or less, this will not affect your eligibility for Pension Credit.

If you have more than £10,000, every £500 over £10,000 will count as £1 income a week. So, if you have £11,000 in savings and shares, this counts as £2 income a week.

If your income is below £201.05 a week then guarantee credit will top you up to that amount.

If you’re claiming as a couple and your weekly income is below £306.85, it will be topped up to that level.

The criteria to claim savings credit is different. You can only access it if you reached state pension age before 6 April 2016, and you have some savings and/or a private pension.

You must have an income of at least £174.49 a week if you’re single or £277.12 a week if you’re claiming as a couple.

The eligibility criteria are complicated, and is likely to be one of the reasons why many pensioners don’t bother claiming.

You can use the government’s pension credit calculator to work out if you can claim and how much you’ll get. You’ll need to have details of your earnings, benefits, pensions, savings, and investments. If you get stuck, call the helpline on 0800 99 1234 (Monday to Friday, 8am to 6pm). 

Claiming Pension Credit

You can apply for Pension Credit in several ways. Options include applying online on the government website, phoning the helpline (0800 99 1234), or submitting an application by post.

If you haven’t reached state pension age yet, you can still apply up to four months before this date.

You’ll need your National Insurance number when you apply, plus information about your income, savings and investments. If you have a partner, you’ll need the same details about them too.

The uptick in people applying for Pension Credit has also seen an increase in the number of pensioners being turned down. According to Quilter, the government refused 95,515 claims in 2022/23, representing a 231% spike on the previous year.

You can ask the Pension Service to look at your claim again if you think a decision about your Pension Credit is wrong. Asking them to change their decision is called a "mandatory reconsideration". It’s free to do and you don’t need a solicitor to help.

Quilter says that some of the reasons for a claim being refused include having too much income, not being a UK resident, failure to provide all requested information to support a claim, not claiming on time and not being the right age.