Pension Credit is the principal element of the UK welfare system for people of pension age. It is intended to supplement the UK State Pension, or to replace it (for example, if the claimant did not meet the conditions to claim a State Pension). It was introduced in the UK in 2003 by Gordon Brown, then Chancellor of the Exchequer. It has been subject to a number of changes over its existence, but has the core aim of lifting retired people of limited means out of poverty.
Eligibility may be estimated on a government website. [1]
The scheme was introduced to replace the Minimum Income Guarantee, which had been introduced in 1997, also by Gordon Brown. This combined the existing applicable amount (of benefit) in Income Support, together with the Pensioner Premium, which was itself substantially increased; these changes gave the impression of a new, more generous benefit package aimed at pensioners. [2]
Pension Credit has two elements:
The minimum age for claiming rose in line with the increase in women's retirement age (see State Pension age). Since September 2020 it has been 66, but it will continue to rise from 2026 onwards.
The values of Guarantee Credit and Savings Credit are automatically uprated each year, in line with inflation, as are the basic State Pension and Second State Pension (S2P). However, they are uprated by different inflation measures:
The net, deliberate, effect of these differences is to make the total combined impact gradually converge, over about 40 years, to an eventual situation where the total benefit is around £170 a week, whatever an individual's circumstance. Consequently, the Coalition government proposed replacing this complex system with a single flat-rate pension of about £170 per week.
Savings Credit, which would be abolished by the flat-rate pension policy, is currently only claimed by around 1% of eligible individuals, and few people of eligible age are aware of its existence. As an interim measure, the Coalition government changed the uprating system, so that higher levels of income would be obtained automatically, instead of via Savings Credit:
Anyone who was in receipt of the Guarantee Credit part of Pension Credit was also eligible for full Council Tax Benefit, which covered the cost of their Council Tax bill. Whilst Council Tax Benefit itself was abolished in 2013, a new system of benefit entitlement, known as Council Tax Reductions [4] (marketed by many councils as Council Tax Support) was introduced. However, for pensioners in particular, the Council Tax rate must be set to zero if they are in receipt of Guarantee Credit, maintaining the same level of support.
Anyone who was in receipt of the Guarantee Credit part of Pension Credit was also eligible for full Housing Benefit. This could be a significant amount, ensuring that a retired person in this position has their rent paid in full. However, the Coalition government proposed to change this rule in a substantial manner by abolishing Housing Benefit. It was intended that from October 2014, Pension Credit would gain a new core element for Housing costs comparable with the Housing Element of Universal Credit, for working-age benefit claimants. The Housing element would be based on Local Housing Allowance, in a similar manner to Housing Benefit, but payments would be incorporated within Pension Credit, rather than being a separate benefit claimed from the local council. It is not clear when, or if, this plan will be implemented.
As with Universal Credit, there is an additional Element available for people suffering from certain levels of disability. The additional amount is called Extra Amount for Severe Disability and amounts to £53.65 per week (in 2010/11 prices); as with most elements of Pension Credit, it is added to the core amount, and the whole thing is paid as a single weekly lump sum.
The Qualification criteria are relatively simple – the applicant, and/or their partner must be in receipt of:
The rules are complex and there are exceptions; for example, no-one in the household must be claiming Carer's allowance for looking after the disabled individual (otherwise they would be being paid twice for the same thing). The government encourages people interested in claiming this element to contact the Pension, Disability and Carers Service via Gov.uk, or an agency with expertise in benefits, such as the Citizens Advice Bureau, or a respected charity like Age UK.
According to Age UK more than a third of those entitled to claim Pension Credit fail to do so based on estimates of take-up from 2009/10. Up to 1.6 million of pensioners on average were missing out on an extra £1,700 a year. [5] Following the announcement in July 2024 that the Winter Fuel Payment is to be restricted to those receiving Pension Credit, the number of Pension Credit applications rose by 145%. There was a backlog of 53,400 claims and only half of processed applications were approved. [6]
A disability pension is a form of pension given to those people who are permanently or temporarily unable to work due to a disability.
The Department for Work and Pensions (DWP) is a ministerial department of the Government of the United Kingdom. It is responsible for welfare, pensions and child maintenance policy. As the UK's biggest public service department it administers the State Pension and a range of working age, disability and ill health benefits to around 20 million claimants and customers. It is the second-largest governmental department in terms of employees, and the second largest in terms of expenditure.
Jobseeker's Allowance (JSA) is an unemployment benefit paid by the Government of the United Kingdom to people who are unemployed and actively seeking work. It is part of the social security benefits system and is intended to cover living expenses while the claimant is out of work.
A means test is a determination of whether an individual or family is eligible for government benefits, assistance or welfare, based upon whether the individual or family possesses the means to do with less or none of that help.
Housing Benefit is a means-tested social security benefit in the United Kingdom that is intended to help meet housing costs for rented accommodation. It is the second biggest item in the Department for Work and Pensions' budget after the state pension, totalling £23.8 billion in 2013–14.
Local Housing Allowance (LHA) was introduced by the government of the United Kingdom on 7 April 2008 to provide Housing Benefit entitlement for tenants renting private-sector accommodation in England, Scotland and Wales. The LHA system introduced significant changes to the way Housing Benefit (HB) levels are restricted and how benefit is paid. It did not replace Housing Benefit - it is just a different way of calculating entitlement under the existing Housing Benefit scheme: the Local Housing Allowance is based on the 30th percentile of local rented accommodation, while the 50th percentile or median was used from the introduction of the policy until 2011. LHA rates relate to the area in which the housing-benefit claim is made. These areas are called "Broad Rental Market Areas", defined as "where a person could reasonably be expected to live taking into account access to facilities and services", and a selection of rents in the area are used to determine the LHA for each category of housing in the area.
Working Tax Credit (WTC) is a state benefit in the United Kingdom made to people who work and receive a low income. It was introduced in April 2003 and is a means-tested benefit. Despite the name, tax credits are not to be confused with tax credits linked to a person's tax bill, because they are used to top-up low wages. Unlike most other benefits, it is paid by HM Revenue and Customs (HMRC).
Income Support is an income-related benefit in the United Kingdom for some people who are on a low income, but have a reason for not actively seeking work. Claimants of Income Support may be entitled to certain other benefits, for example, Housing Benefit, Council Tax Reduction, Child Benefit, Carer's Allowance, Child Tax Credit and help with health costs. A person with capital over £16,000 cannot get Income Support, and savings over £6,000 affect how much Income Support can be received. Claimants must be between 16 and Pension Credit age, work fewer than 16 hours a week, and have a reason why they are not actively seeking work.
Social security, in Australia, refers to a system of social welfare payments provided by Australian Government to eligible Australian citizens, permanent residents, and limited international visitors. These payments are almost always administered by Centrelink, a program of Services Australia. In Australia, most payments are means tested.
Employment and Support Allowance (ESA) is a United Kingdom welfare payment for adults younger than the State Pension age who are having difficulty finding work because of their long-term medical condition or a disability. It is a basic income-replacement benefit paid in lieu of wages. It is currently being phased out and replaced with Universal Credit for claimants on low incomes, although the contribution-based element remains available.
Incapacity Benefit was a British social security benefit that was paid to people facing extra barriers to work because of their long-term illness or their disability. It replaced Invalidity Benefit in 1995. The government began to phase out Incapacity Benefit in 2008 by making it unavailable to new claimants, and later moved almost all the remaining long-term recipients onto Employment and Support Allowance.
Disability Living Allowance (DLA) is a social security benefit in the United Kingdom paid to eligible claimants who have personal care and/or mobility needs as a result of a mental or physical disability. It is tax-free, non-means-tested and non-contributory. The benefit was established by the Social Security Contributions and Benefits Act 1992, integrating the former benefits Mobility Allowance and Attendance Allowance and introducing two additional lower rates of benefit. Prior to 2013 it could be claimed by UK residents aged under sixty five years. However, the benefit was phased-out for the majority of claimants between 2013 and 2015 and replaced by a new Personal Independence Payment. DLA can still be claimed by children under sixteen and can still be received by existing claimants who were aged sixty five or over on 8 April 2013.
Disability benefits are a form of financial assistance or welfare designed to support disabled individuals who cannot work due to a chronic illness, disease or injury. Disability benefits are typically provided through various sources, including government programs, group disability insurance provided by employers or associations or private insurance policies typically purchased through a licensed insurance agent or broker, or directly from an insurance company.
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Child benefits in the United Kingdom are a series of welfare payments and tax credits made to parents with children in the UK, a major part of the welfare state.
Carer's Allowance is a non-contributory benefit in the United Kingdom payable to people who care for a disabled person for at least 35 hours a week. It was first established as Invalid Care Allowance in 1976, and married women were not eligible. This policy was held to be unlawful sexual discrimination by the European Court in 1986 in the case of Jackie Drake. See Carers rights movement In May 2020 around 1.1 million people in England were entitled to Carer’s Allowance, of which 780,000 people were being paid it, according to the National Audit Office.
Many employers in the UK provide a Christmas bonus to their staff. Amounts vary widely, and may be supplemented by gifts from customers, known as Christmas boxes, usually paid direct. Some employers provide an annual bonus at other times of the year. Bonuses may be nominal, based on performance, or a thirteenth salary type scheme.
Funeral payments are a social security payment in the United Kingdom that are part of the Social Fund. They are to help with the costs of a funeral. To be eligible for a funeral payment, a claimant or their partner must be in receipt of one of the following income related benefits:
Social Security Scotland is an executive agency of the Scottish Government with responsibility for social security provision.
The Healthcare Travel Costs Scheme was established across the United Kingdom National Health Service in 1988. Patients and their children in receipt of means tested benefits, or on a low income, could get help with the cost of travel to hospital appointments. It does not apply to primary care or community services and it does not apply to visitors.