Changes to State Pension and Pension Credits

5 Apr

Budgets are sometimes contrived and Chancellor George Osborne’s was no different. It is estimated that almost two million pensioners will not benefit overall from the changes. Yes, they will receive more through State Pension but will receive less through Pension Credits.

Pension Credits will reduce  for pensioners who saved for their retirement, which takes affect this week. These changes are also expected to effect discounts, such as, on council tax, housing benefit, cold weather payments, and help with heating costs from energy suppliers.

I think the changes will be a shock for many pensioners who will be receiving this news in letters from the Department for Work and Pensions revealing their state pension for the new tax year.

Personally, I believe that it is unfair for older people on low incomes to have their benefits reduced. Typically and sadly I think it is plausible that this may be the case, where the headline is rather rosy – highest rise in State Pension – and the details may not be quite so generous. The changes to Pension Credit were known as they were announced in the pre-Budget report in 2011.

The situation will lead to those pensioners who have larger savings will receive less while those who are poorer will receive more. To be fair with the government’s limited resources I think they have tried to make the best out of a poor situation. I would prefer all pensioners to benefit but where would we need to make cuts to pay for this ? – Education, Health Service, Social Services, Police Force, etc. – I just feel they were limited on choices.

Pension Credit has two components:

  • Guarantee Credit, which tops-up your income
  • Savings Credit, which rewards people who  saved for retirement.

Guarantee Credit is claimed by the poorest pensioners. The government calculates how much income you receive from state pension, private pension and savings of more than £10,000. Currently, Guarantee Credit it tops up your pension, to income of at least £137.35 a week (for a single person) and £209.70 a week (for a couple).

Pensioners with an income of at least £103.15 a week (£164.55 for couples) can receive Savings Credit. This pays up to £20.52 a week for a single pensioner and £27.09 for a couple. This is on top of the basic state pension of £102.15 and any Guarantee Credit.

Increases to Guarantee Credit historically has been linked to average annual increases in earnings. In November 2011, the Chancellor announced a higher increase of 3.9%. Guarantee Credit from next week will increase to at least £142.70 a week (£217.90 for couples).

For those affected, time is upon us to make some decisions – those who have accepted lower returns on capital may need to review their decisions to up their income to support cost of the changes. I look after many retired people who are enjoying the benefit of income portfolios typically yielding around 4.4% net of basic rate tax. As a portfolio, capital values will move up and down but risk profiling helps limit the risk to capital.

Who Can Claim Pension Credit

The qualifying age for pension credit is 61 for Guarantee Credit and 65 for Savings Credit.

The Guarantee Credit age is rising with the women’s state pension age. This will hit 65 in 2018, 66 in 2020 and 67 in 2027.

The new rules set out that from April, pensioners must have an income of £111.80 a week (£178.35 for couples) to qualify for Savings Credit.

The Treasury has also reduced the maximum payout from April to £18.54 (£23.73 for a couple).

If I can help or you have any questions, please ask. My details are in the header or Email me at

%d bloggers like this: