Are you eligible for pension credit?

Pension credit is one of the UK's most unclaimed benefits: the government estimates that more than 1.5 million pensioners who are eligible for pension credit have not applied for it.

It means they're missing out on a combined total of up to £2.8 billion, and are individually losing hundreds of pounds a year.

For pensioners on a low income it could make an enormous difference, so it's worth getting to grips with this benefit and how to claim it.

State pension - how much will you receive and when?

The guarantee credit

Pension credit comes in two parts. The first is the guarantee credit, which is designed to ensure that everyone over a minimum age threshold (currently 62) receives £148.35 in income each week - and that couples receive at least £226.50 between them. If you have income lower than this, you can claim the credit to top you up.

The income used in the calculation includes almost everything you receive: the state pension, private pensions, some other benefits (such as carer's allowance), salary, and income from any savings above £10,000.

The way they calculate income on savings is a bit of a cheek, because rather than counting the actual income you get, they assume you get £1 a week on every £500 of savings - which is far more than anyone receives. However, income you receive from savings under £10,000 is ignored.

It's also worth bearing in mind that the income from some benefits is excluded from the calculations, including attendance allowance, disability living allowance, personal independence payment, housing benefit and council tax reduction.

It's worth applying for this even if you stand to gain very little, because it will mean you may be eligible for other benefits. It means, for example, that unless you have someone else living with you, it's unlikely you have to pay council tax, you'll get free NHS dental treatment, you'll be eligible for a cold weather payment, and if you rent your property you may have the entire rent paid for by housing benefit.

Calculate oyour pension income options

The savings credit

The second element to pension credit is the savings credit - which applies to people over the age of 65 who are on a relatively low income and have saved for retirement. The idea is to reward people for their savings.

To qualify, a single person needs to have income of between £120.35 a week and £190 a week, and couples should have income between £192 and £279 a week. For every £1 you exceed the minimum threshold you get 60p of savings credit. You can earn up to £16.80 in extra income each week if you're single, and £20.70 for couples.

You may be entitled to more if you pay mortgage interest, property service charges, are caring for someone or are severely disabled. If you fall into any of these categories, it's worth checking the government's calculator to see what you could be entitled to. The carer premium, for example, could be worth up to £34.20 a week.

How to apply

You'll need to complete the application form, which you can have filled in by calling the Pension Service on 0800 99 1234. Alternatively you can do it yourself: you can get a form from the website or by visiting a Citizen's Advice Bureau or your local Age UK, where you can also get help with filling the form in.

The future

The system is being rolled up into the universal credit system in 2017. However, if you are already claiming pension credit by then you won't be affected.

The exception to this rule is where one half of the couple is over pension credit age and the other is under it until after 2017. In this instance, as soon as the younger member of the couple qualifies, the older one will stop receiving pension credit and the younger one will need to claim universal credit instead.

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