what Pension Credit am I entitled to?

Working out the amount you’re entitled to under pension credit can be complicated. The two parts – the guarantee credit and savings credit are worked out differently.

The guarantee credit

The government sets a minimum level it thinks people 60 and over should live on. This is known as the minimum guarantee.  So, if you’re 60 or over and you’re income is less than this minimum guarantee, you are entitled to claim a top-up to bring your income up to that level.

How much guarantee credit you get will depend on other money you have, such as other pensions and your savings. Your guarantee credit payment will bridge the gap between

the money you already have coming in and your appropriate amount.

The minimum guarantee level for 2006-7 is £114.05 if you’re single, and £174.05 for a couple. The minimum guarantee level is higher if you are severely disabled or are a carer, and you may be entitled to extra to cover housing costs (for more information see www.thepensionservice.gov.uk/pensioncredit/entitled.asp).  

So, for example, if the only income you have to live on is the basic state pension of £84.25 a week you’d be entitled to claim £29.80 to bring you up to the minimum guarantee level of £114.05 a week.

To find out if you might be entitled to Pension Credit, you need to add up your weekly net income (after deductions) and savings.

Working out your income

The government only counts certain types of income when working out your Pension Credit. These types include:

• pensions (including state pension, occupational and personal pensions
• Financial Assistance Scheme payments or Pension Protection Fund payments
• certain benefits, (for example, Carer's Allowance)
• earnings from a job
• savings you have over £6,000 are also taken into account. Every £500 or part of £500 of savings over £6,000 counts as £1 a week of income. This figure is over £10,000 if you live permanently in a care home.

The types of savings and investments taken into account include: money in a bank, building society or post office account; savings you or your partner keep at home; National Savings Certificates and Premium Bonds; investments such as ISAs and PEPs; shares or unit trusts; income bonds, capital bonds or granny bonds; and property and land (but not including the place where you normally live).

Types of income that are not counted include: Attendance Allowance; Disability Living Allowance; Housing Benefit; and Council Tax Benefit.

Savings credit

One of the main reasons the government brought in the savings credit is that the guarantee credit on its own could discourage people who expect to have a low income when they retire from saving at all. 

You might think for example that it is not worth putting money away each month to provide a private pension of £30 a week on top of your state pension of £84.25 a week when you could have your pension topped up to same level by the guarantee credit.

So the savings credit is meant to reward people who have saved for a pension. If you’re over 65, you may be able to claim a maximum savings credit of £17.88 if you’re single and £23.58 for a couple. However, the actual amount you might get is worked out using a complex formula.

The way it works is that you can claim a savings credit of 60 pence for each £1 of income you have which falls in between two thresholds levels.  The ‘lower’ threshold is set at the same level of the current full basic state pension - £84.25 a week for a single person and £134.75 for a couple. The ‘upper’ threshold is set at the minimum guarantee level - £114.05 for a single person and £174.05 for a couple.

However, the amount of savings credit you can get tapers away so that once you have an income of £159 a week and above if you’re single, or £233 a week and above as a couple you won’t get anything from savings credit.