How Pension Credit is worked out
- Guarantee Credit
- Savings Credit
- Savings Credit calculation
- Calculating Pension Credit: some examples
Guarantee Credit
Each part of Pension Credit – Guarantee Credit and Savings Credit – is worked out separately. Some people will get both, others just one.
This part of the guide explains how we work out the Guarantee Credit element.
Here are some examples to show how Pension Credit works in different ways for different people. Guarantee Credit is the difference between your customer’s ‘appropriate amount’ and your customer’s income, which may include an amount of deemed income from their capital (explanation of deemed income).
The ‘appropriate amount’
Your customer’s ‘appropriate amount’ [Reference 1] will be made up of:
- the standard amount [Reference 2] and may also include some or all of the following extra amounts [Reference 3]:
- extra amount for severe disability
- extra amount for carers
- extra amount for housing costs (for example mortgage interest) – to cover certain accommodation costs that are not met by Housing Benefit,
- transitional extra amount – for some people who were getting Income Support or income-based Jobseeker’s Allowance or income related Employment and Support Allowance before they started to get Pension Credit.
The current rates for these amounts are given in the next section.
The standard amount
The standard amount is the minimum amount of money the Government says a person needs for their day-to-day living, including household costs such as water and fuel charges.
There are two rates of standard amount:
- £137.35 a week for single people
- £209.70 a week for couples.
These rates, and those quoted in the sections that follow are the figures that apply from April 2011. Rates normally increase each April and can be found in the Benefit and Pension rates leaflet.
There is also information on the standard amount for people in polygamous marriages.
The extra amount for severe disability
There are two rates for severe disability – the higher rate is twice the lower rate.
If your customer is single they may get the lower rate of £55.30 if:
- they live alone, and
- they get Attendance Allowance or the middle or highest rate of the care component of Disability Living Allowance, and
- no-one is paid Carer’s Allowance for looking after them.
If your customer has a partner they may get the higher rate of £110.60 a week if:
- they both get Attendance Allowance or the middle or highest rate of the care component of Disability Living Allowance, and
- no-one else lives with them, and [Reference 4]
- no-one is paid Carer’s Allowance for looking after them.
If your customer has a partner they may get the lower rate of £55.30 a week if:
- no-one else lives with them [Reference 4], and either
- they both get Attendance Allowance or the middle or highest rate of Disability Living Allowance and someone gets Carer’s Allowance for looking after one of them (but not both of them), or
- one of them gets Attendance Allowance or the middle or highest rate of the care component of Disability Living Allowance and the other is blind and no-one is paid Carer’s Allowance for looking after either of them.
The extra amount for carers
Your customer may be able to get this extra amount of £31.00 a week if:
- they or their partner are getting Carer’s Allowance, or
- either of them has claimed Carer’s Allowance and would be getting it if they did not already have another higher benefit. (We call this ‘underlying entitlement’.)
If each partner satisfies either one of these conditions, the extra amount is doubled.
The extra amount is paid for eight weeks after Carer’s Allowance (or underlying entitlement to it) stops, unless Carer’s Allowance has already continued for eight weeks after the person being cared for has died.
The extra amount for housing costs
The extra amount for housing costs is for those costs not covered by either:
Housing Benefit payments from the local council to help with rent or towards the cost of living in a hotel, guest house, hostel or somewhere similar, or
- Council Tax Benefit payments from the local council to help with Council Tax.
The housing costs that can be covered by extra amounts are:
- mortgage interest payments on loans taken out to buy their property
- interest on loans for specific repairs and improvements on their home
- hire purchase interest payments when a home is being bought by hire purchase
- ground rents relating to a long tenancy
- some service charges
- co-ownership and Crown tenancy charges
- charges for tents and site rents,
- rentcharge payments.
Other costs such as water charges, some repairs and insurance costs and cesspit and septic tank emptying are treated as covered by the standard amount.
In Scotland the rent for a croft is covered by the Housing Benefit scheme.
The transitional extra amount
Your customer’s ‘appropriate amount’ may include a transitional extra amount to make sure they do not lose money as a result of rule changes, if:
- they were getting Income Support [Reference 5], income-based Jobseeker’s Allowance or income-related Employment and Support Allowance immediately before they started to get Pension Credit and they were getting some form of transitional protection because of a previous change in the rules.
The transitional extra amount is the difference (if any) between:
- the final Income Support, income-based Jobseeker’s Allowance or Employment and Support Allowance applicable amount (the amount before income is deducted), less
- any amounts which were included in your customer’s applicable amount for children, plus
- any transitional additions, and
- the standard amount, plus
- any extra amounts for severe disability, carers or housing costs.
The transitional extra amount will go down when other parts of your customer’s ‘appropriate amount’ increase or if they start to get another extra amount.
If your customer stops getting Pension Credit for less than eight weeks and had been getting a transitional extra amount immediately before this, it may be included in their ‘appropriate amount’ when they re-apply.
Savings Credit
Savings Credit is extra money for people aged 65 or over – or whose partner is 65 or over – whose qualifying income is above the Savings Credit starting point. This is called the Savings Credit threshold in the legislation.
The Savings Credit starting point is:
- £103.15 for a single person
- £164.55 for a couple.
Savings Credit calculation
If your customer’s Savings Credit qualifying income is the same as, or below, the Savings Credit starting point they cannot get Savings Credit.
If their qualifying income is more than the Savings Credit starting point they may be entitled to Savings Credit. It is worked out as follows.
‘Amount A’
First, work out ‘Amount A’. This is 60% of the difference between your customer’s qualifying income and the Savings Credit starting point, up to a maximum of £20.52 for a single person and £27.09 for a couple.
If your customer’s qualifying income is the same as, or more than, the standard minimum guarantee, the maximum Amount A applies.
If your customer’s qualifying income is less than, or the same as, their ‘appropriate amount’, their Savings Credit will be the same as Amount A.
If your customer’s qualifying income is more than their ‘appropriate amount’, work out Amount B.
‘Amount B’
Amount B is 40% of the difference between their total income and their ‘appropriate amount’.
Take Amount B from Amount A. What is left is your customer’s Savings Credit.
If your customer seems to be eligible then get them to call The Pension Service who will be able to help them claim in one phone call.
Calculating Pension Credit: some examples
These examples show how Pension Credit is worked out.
The rates used in these examples are:
Standard amount:
- single person: £137.35
- couple: £209.70
Savings Credit starting point:
- single person: £103.15
- couple: £164.55
Savings Credit maximum:
- single person: £20.52
- couple: £27.09
These are the figures that apply from April 2011. The rates normally increase each April and can be found in the Benefits and Pension rates leaflet.
This maximum is 60% of the difference between the standard amount (£137.35 for a single person and £209.70 for a couple) and the Savings Credit starting point.
Example 1
Pauline is 64 and widowed. Her State Pension is £83.68 and she has an occupational pension of £154.65 a month (£35.68 a week). Her ‘appropriate amount’ is simply the standard amount as she is not entitled to any extra amounts.
Pauline’s ‘appropriate amount’ is £137.35. Her income is £119.36, so she is entitled to Guarantee Credit of £17.99 a week. She is not entitled to Savings Credit because she is under 65.
Pauline’s Pension Credit is £17.99.
When Pauline is 65, she is likely to also qualify for Savings Credit, based on her current levels of income.
The difference between her qualifying income (£119.36) and the Savings Credit starting point (£103.15) is £16.21, and 60% of this is £9.73. This is less than the maximum, so Amount A will be £9.73. As her income is less than her ‘appropriate amount’ she will be entitled to a Savings Credit of £9.73.
When Pauline is 65 her total Pension Credit will be £27.72, based on current benefit rates (i.e. if she turns 65 in the same year).
Example 2
Joyce is 62. She lives alone. Her State Pension is £61.20. She also gets Attendance Allowance of £73.60 and has savings of £8,000.
Joyce’s ‘appropriate amount’ is £192.65, which includes the extra amount for severe disability. Her Attendance Allowance does not count as income and her savings are less than £10,000 [Reference 5a] so her income is £61.20. She is entitled to Guarantee Credit of £131.45.
As Joyce’s qualifying income is below the Savings credit threshold she is not entitled to Savings Credit.
Joyce’s total Pension Credit is £131.45.
Example 3
Peter is 74. He is single. His State Pension is £135.98 and he has £13,000 in a building society account. He owns his own flat (no mortgage) and pays ground rent of £750 a year (£14.43 a week).
Peter’s ‘appropriate amount’ is £151.78, which includes an extra amount for housing costs of £14.43. His income is £141.98 (including £6 deemed income from capital), so he is entitled to Guarantee Credit of £9.80 a week.
All Peter’s income is qualifying income, and is more than the standard amount. Amount A is therefore £20.52 (the maximum amount for a single person).
As Peter’s income is less than his ‘appropriate amount’ he is entitled to £20.52 Savings Credit.
Peter’s total Pension Credit is £30.32.
Example 4
Lynn and Simon are both 73. Lynn’s State Pension is £61.20 and Simon’s is £120.42. They have savings of £25,000. Their 'appropriate amount' is simply the standard amount as they are not entitled to any extra amounts.
Their ‘appropriate amount’ is £209.70. Their income is £211.62 (including £30 deemed income from their capital). They are not entitled to Guarantee Credit.
All their income is qualifying income and is more than the standard amount. Amount A is therefore £27.09 (the maximum amount for a couple).
Their income is £1.92 more than their ‘appropriate amount’, so 40% of this (£0.76) is taken away from Amount A, giving a Savings Credit of £26.33.
Lynn and Simon’s Pension Credit is £25.45.
Example 5
Tom is 60. He was born on 6 August 1950. He will reach the minimum Pension Credit qualifying age on 6 January 2011 when he is aged 60 and 5 months.
Tom is currently getting the income-related component of Employment and Support Allowance of £94.25 (which includes £67.50 personal allowance plus £26.75 work-related activity component) and has no other income.
Tom continues to get the income-related component of Employment and Support Allowance until he reaches the minimum qualifying age for Pension Credit on 6 January 2011 when he is able to choose whether to claim Pension Credit or the income-related component of Employment and Support Allowance (Tom could continue to get the income-related component of Employment and Support Allowance until he reaches his State Pension age).
If Tom decides to claim Pension Credit he will get £137.35 per week if his circumstances remain the same. If he decides to stay on the income-related component of Employment and Support Allowance he will get £43.10 pensioner premium in addition to his current rate (a total of £137.35).
Example 6
John and Fiona are aged 60 and 52. John is currently on Income Support. He gets £780 a year occupational pension (£15 per week) and £90.95 Income Support for himself and Fiona. John was born on 6 October 1950 and will reach the minimum qualifying age on 6 May 2011, when he is 60 and 7 months.
John can continue to claim Income Support until he reaches the minimum qualifying age for Pension Credit and claims Pension Credit for himself and Fiona. When John reaches the minimum qualifying age his appropriate amount will be £209.70. So if his circumstances remain the same John will be entitled to £194.70 a week.
