Income Rules

If your customer, or your customer’s partner, satisfy the age and residency rules, they can probably get Pension Credit if the money they have coming in is less than:

£137.35 a week if they are single, or
£209.70 a week if they have a partner.

If this applies they are likely to get Guarantee Credit – but also see how we work out capital for Pension Credit.

This will top up their weekly income to at least the levels shown above.

If your customer, or your customer’s partner, are aged 65 or over and have made provision towards their retirement, such as savings or a second pension, they may get extra Pension Credit in the form of Savings Credit. This element could be up to:

£20.52 a week for single people, or
£27.09 a week for couples.

This means that the customer may still get Pension Credit even if the money they or their partner have coming in is up to around:

£188.65 a week if they are single, or

£277.43 a week if they have a partner.

These are the figures that apply from April 2011. The rates normally increase each April and can be found in the Benefit and Pension rates leaflet.

Even if your customer has more money than this coming in each week, they may still get Pension Credit if:

they or their partner (or both of them) have a severe disability

they or their partner (or both of them) look after a severely disabled person, or

they have certain housing costs, like mortgage interest payments.

The extra amount for severe disability, the extra amount for carers and the extra amount for housing costs give more information about these special circumstances.

Rules for couples

Customers will be treated as a couple if they live with their husband, wife or civil partner or with someone as husband, wife or civil partner. The other person is called their partner. There are guidelines for deciding whether two people are treated as a couple.

In some cases, customers will be treated as a couple if they are temporarily separated from their partner. The guidance is explained in People living apart from their partner.

If your customer has a partner and they are treated as a couple, they will have a joint ‘appropriate amount’ and their income and capital will be added together when we work out their Pension Credit.

If both partners have reached the minimum qualifying age either of them can apply for Pension Credit. Only one partner can get Pension Credit at any one time. If they cannot agree which of them will apply, we can decide for them.

To find out the age at which your customer could become entitled to Pension Credit, you can use the Pension Credit calculator.

What about children?

Pension Credit does not include any money for children. If your customer has a dependent child living with them, please see Help for people who care for children for other help they may be able to get.

What determines how much Pension Credit my customer will get?

The amount your customer will get depends on:

their weekly income and how much they have saved or invested (their capital), and
if they have a partner, their partner’s weekly income and their capital.

Income: If your customer or their partner has a pension of any kind, it will normally be taken into account. Certain other types of income are also taken into account, but some can be ignored. What counts as income for Guarantee Credit? explains these rules and how different types of income are treated.

Capital: If your customer (or your customer and their partner if they are a couple) have savings and investments which, in total, come to £10,000 or less, we will ignore it. This is the allowable amount of capital. If it comes to more than £10,000 it may affect how much Pension Credit your customer can get. [Reference 5b]

Overview of how Pension Credit is calculated – Guarantee Credit

Calculating a customer’s Guarantee Credit involves a number of steps:

Establish the customer’s weekly income.
Establish the weekly (deemed) income from any capital over the £10,000 threshold. (Deemed income from capital)
Make allowance for any income or capital disregards.
Compare the net income to the ‘appropriate amount’ for your customer.

For Guarantee Credit the payment represents the shortfall between the ‘appropriate amount’ and the net income calculated for your customer.

The sections that follow explain how Pension Credit is worked out.

They explain how:

your customer’s income is calculated, including how earnings are calculated and income disregards are treated
the capital element is calculated, including how capital disregards are treated
we calculate the ‘appropriate amount’ for your customer, and
the individual elements – Guarantee and Savings Credit are arrived at.

Please also see How Pension Credit is worked out – Guarantee Credit

How we work out income for Pension Credit

We use the income your customer already has to work out their Pension Credit. This section explains what counts as income and how it is calculated.

We then add up your customer’s capital and work out the (deemed) income they get from it. This is covered in detail in Deemed income.

Broadly the rules for calculating income are the same for both Guarantee Credit and Savings Credit (Pension Credit). However, there are some types of income that are not counted as income for Savings Credit. Working out income for Savings Credit explains what these are.

If your customer is a self-assessment taxpayer

The amount of State Pension your customer gets will affect the amount of Pension Credit we can pay. State Pension is taxable so your customer must tell us about their tax liability (the income tax they will have to pay or expect to pay). This helps us ensure we pay the correct amount of Pension Credit.

What counts as income for Guarantee Credit?

[Legislation 1]

Your customer’s income means the money they (and their partner if they have one) have coming in from:

State Pension
an occupational or private pension scheme
The Pension Protection Fund or Financial Assistance Scheme
a retirement annuity contract
Civil List pensions
Annuities
most social security benefits, including industrial injury benefits (see Income that is wholly disregarded for a list of the benefits that do not count as income) and similar foreign benefits
War Disablement, War Widow’s or War Widower’s Pensions (or foreign equivalents) and Overage Infirm Allowances
Guaranteed Income Payments (and payments to adults for whom a Child Payment had been paid) from the Armed Forces Compensation Scheme
pensions paid by the German or Austrian governments to victims of Nazi persecution
maintenance from a spouse or civil partner or former spouse or civil partner
payments under the Workmen’s Compensation Scheme
earnings
Working Tax Credit
payments from lodgers, boarders or people renting part of their home (subtenants)
regular payments from equity release schemes
royalties or Public Lending Rights payments
regular payments from trust funds
‘deemed income’ from capital over £10,000, or
any of these types of income paid to a third party, such as a shop or supplier or relative, on your customer’s behalf. (This does not apply if they are bankrupt and payments from their occupational or personal pension have to be paid to their creditors or trustee in bankruptcy and they and their partner have no other income.) [Reference 5c]

Payments made instead of a particular type of income, such as compensation for the non-payment of a particular benefit, are normally treated in the same way as payments of that income would be.

Some of these types of income are either completely, or partially, ignored. These are called the disregards (see Income Disregards).

What doesn’t count as income

We do not count as income, any money your customer has coming in that isn’t on the list above, such as:

regular payments from a charity or relative
payments from local authority social services for personal care
cash in lieu of concessionary coal,
money received on behalf of someone else (other than a partner).

Weekly calculations

[Legislation 2]

Income is worked out on a weekly basis. This means that if, for example, your customer gets paid monthly, we break the total down into equal weekly amounts. Income for an unspecified period or from royalties or Public Lending Rights are treated as being for one year and then divided into weekly amounts. Your customer’s total weekly amount, less any disregards, is then used to calculate their weekly Pension Credit.

Calculations for couples

[Legislation 3]

Your customer’s income and their partner’s income are normally added together for Pension Credit purposes. People living apart from their partner explains the situations where partners can be treated separately).

Notional income

[Legislation 4]

Notional income is income your customer does not actually get but is treated as getting. We may treat them as having notional income when they have:

not claimed State Pension but are entitled to it
not taken income available to them under a personal pension plan or a retirement annuity contract
deferred payments from an occupational pension,
given up their rights to an income (from a trust fund for example) because they wanted to get Pension Credit, or more Pension Credit. (This does not apply if your customer originally chose to take Extra State Pension but changed their mind and took a lump-sum instead.)

Important information if your customer or their partner puts off, or are already putting off, claiming State Pension

From 6 April 2011 if your customer or their partner puts off, or are already putting off, claiming State Pension while claiming Pension Credit, they will not build up extra State Pension or the lump sum for the days they are in receipt of Pension Credit. If your customer or their partner is currently putting off claiming State Pension and they would like more information about how this change will affect them we publish State Pension Deferral – your guide which details this issue.

This new rule also applies to people who claim Income Support, Jobseeker’s Allowance (Income Based) and Employment and Support Allowance (Income Related) while their partner puts of claiming their State Pension.

Working out income for Savings Credit

[Legislation 5]

Qualifying income for Savings Credit is worked out in the same way as income for Guarantee Credit but does not include:

Working Tax Credit
Incapacity Benefit
Jobseeker’s Allowance (contribution-based)
Employment and Support Allowance (contribution-based)
Severe Disablement Allowance
Maternity Allowance,
Maintenance payments from a spouse or former spouse, or civil partner or former civil partner.

Department for Work and Pensions

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