How we work out capital for Pension Credit
Capital includes money held in any form – cash, bank and building society accounts, Premium Bonds, investment trusts, shares, ISAs, etc – and from any source – savings, inheritance, redundancy, lump-sum grants, ad hoc or lump sum equity release payments etc. It also includes the net market value of land and property.
Calculations for couples
If your customer has a partner, the capital held by both of them will usually be added together and treated in the same way as the capital held by a single person. See People living apart from their partner for situations where partners can be treated separately.
Disregarded capital
The value of some types of capital is disregarded (Capital disregards).
Deemed income
If the net value of your customer’s capital is more than £10,000, they will be treated as if they have an income from it. This figure has increased from £6,000 to £10,000 from 2 November 2009. This is called deemed income and will affect their Pension Credit calculations (Deemed income from capital). The actual interest or dividends from capital are not used to work out income.
Notional capital
Notional capital is capital your customer doesn’t actually have but is treated as having.
We may treat your customer as having notional capital if they got rid of capital to get Pension Credit or more Pension Credit – for example, if they knew they had too much money to get Pension Credit so gave some to a grandchild.
We will not treat your customer as having notional capital if they used capital to repay or reduce a debt (for example, a mortgage) or to buy something which was reasonable in the circumstances (for example, replacing a car might be considered reasonable, buying a luxury car is probably not).
Reduction over time
If your customer is treated as having notional capital, the amount they are treated as having will be reduced over time.
- If your customer is getting some Pension Credit the reduction will be equal to the amount of additional Pension Credit they would have been entitled to had they not been treated as having this capital.
- If your customer is not entitled to any Pension Credit the reduction will be equal to the amount of Pension Credit and any additional Housing Benefit and Council Tax Benefit they would have been entitled to had they not been treated as having this capital. If they re-apply more than six months after being refused Pension Credit, the weekly amount of the reduction in their capital will be recalculated.
