Pension Credit (PC) is a means tested benefit for people aged 60 or over. It aims to ensure that people over 60 have a guaranteed weekly income, and also rewards those who have made some additional provision for retirement above the basic state pension.

PC consists of two elements:

	guarantee credit;
	savings credit.

A person may be entitled to either or both of these elements. A prisoner who has been sentenced or has been on remand for more than 52 weeks or a person who is a member of a religious order and fully maintained by that order cannot claim PC. PC is not taxable.

1. WHO CAN A PERSON CLAIM FOR?

When claiming PC, a person can claim for her/himself and her/his partner if s/he has one. All income and capital of a person’s partner, whether married or in a civil partnership or not, is aggregated to the person’s income and capital for the purposes of an assessment. There are no child increases payable with PC and a claim should be made instead for Child Tax Credit (CTC). Any income of a dependent child will not affect a person’s PC.

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2. GUARANTEE CREDIT

2.1 Entitlement

A person may be entitled to a guarantee credit if s/he is:

	aged 60 or over;
	habitually resident in the Common Travel Area and has the right to reside;
	physically present in Northern Ireland;
	not subject to immigration control.

2.1.1 Aged 60 or over

A person aged 60 or over can claim a guarantee credit. However, this will increase to 65 between 2010 and 2020 in line with the Part 1 of Schedule 2 of the Pensions (NI) Order 1995 which gradually increases the retirement age for women.

2.1.2 Habitually resident in the Common Travel Area

A person must be habitually resident and have a right to reside in the Common Travel Area (UK, Channel Islands, Isle of Man or Republic of Ireland) to qualify for a guarantee credit. Some people are automatically treated as being habitually resident, including people who are workers within specific pieces of European legislation and who are also citizens of the European Economic Area or from accession countries, refugees and people with exceptional leave to remain in the UK within immigration law.

A person’s entitlement will continue during temporary absences from Northern Ireland for up to:

four weeks where the person’s absence is unlikely to exceed 52 weeks, and s/he continues to satisfy the other entitlement conditions;

eight weeks where the person:

is unlikely to be absent for more than 52 weeks; and

continues to satisfy the other entitlement conditions; and

is accompanying a young person solely in connection with arrangements for the treatment of the young person for a disease or bodily or mental disablement outside Great Britain by an appropriately qualified person. A young person is a person under sixteen or a person under 20 who before her/his nineteenth birthday was in full time education or on an approved training course. The young person must be living with the person claiming.

2.2 Calculating guarantee credit

A person’s guarantee credit is calculated in three steps. To assess a person’s entitlement to guarantee credit:

Step 1: calculate the appropriate minimum guarantee; then

Step 2: calculate the total income; then

Step 3: compare appropriate minimum guarantee and income.

2.2.1 Step 1: appropriate minimum guarantee

A person’s appropriate minimum guarantee represents the minimum amount of income that the government believes a person should have to live on each week. It aims to ensure that the weekly income of all those entitled is brought up to a minimum level. The exact figure depends upon a person’s marital status, whether s/he is part of a couple, any disabilities, caring responsibilities and eligible housing costs. The figure consists of:

	standard minimum guarantee; plus
	additional amounts (including housing costs).

2.2.1.1 Standard minimum guarantee

The amount of the basic standard minimum guarantee is as follows.

Amount

Single person	£119.05
Couple	£181.70

2.2.1.2 Additional amounts

The additional amounts are as follows.

Severe disability

Amount

Single person	£ 48.45
Couple – one qualifies	£ 48.45
Couple – both qualify	£ 96.90

Where a person is single, s/he will qualify for the lower rate of the severe disability additional amount if:

	s/he is in receipt of Attendance Allowance, the care component of Disability Living Allowance (DLA) at the middle or high rate, Constant Attendance Allowance or Exceptionally Severe Disablement Allowance; and
	no one aged eighteen or over is residing with her/him; and
	no one is receiving a Carers Allowance (CA) for looking after her/him.

Where a person has a partner, s/he will qualify for the lower rate of the severe disability addition if:

	s/he and partner are both in receipt of Attendance Allowance, the care component of DLA at the middle or higher rate, Constant Attendance Allowance or Exceptionally Severe Disablement Allowance; or
	one partner is in receipt of Attendance Allowance, the care component of DLA at the middle or higher rate, Constant Attendance Allowance or Exceptionally Severe Disablement Allowance and the other is registered blind; and
	no one aged eighteen or over is residing with the couple; and
	no one receives a CA for looking after one of the partners in receipt of one of the above benefits.

The higher couple rate of the severe disability addition is payable where:

	a person and her/his partner are in receipt of Attendance Allowance, the care component of DLA at the middle or higher rate, Constant Attendance Allowance or Exceptionally Severe Disablement Allowance; and
	no one aged eighteen or over is residing with them; and
	no one receives a CA for looking after either partner.

Where the person claiming has someone aged eighteen or over residing with her/him, her/his presence will be ignored where the person residing:

is a dependent child under 20 in full time non-advanced education or on an approved training course;

is in receipt of Attendance Allowance, DLA middle or high rate care component, Constant Attendance Allowance or Exceptionally Severe Disablement Allowance;

is registered blind or treated as registered blind;

normally lives elsewhere;

lives in the home and is engaged by a voluntary organisation or charity to provide care and a charge is made for that care. Any partner of the carer is also ignored;

is not a close relative of the person claiming or partner and:

is liable to make payments on a commercial basis to the person claiming or partner in order to live in the home; or

is a person to whom the person claiming or partner is liable to make such payments in order to remain in the home;

(Note: Any member of her/his household is also ignored.)

is not a close relative of the person claiming or partner and jointly occupies the home and is a joint owner or is jointly liable with the person claiming or partner to make payments in respect of occupation of the home. If a person is a close relative, s/he will not count as a non-dependant where the co-ownership or joint liability to make payment arose before 11 April 1988 or, if later, on or before the date the person claiming or partner first occupied the home.

Carer

Amount £27.15

A person will qualify for this additional amount if s/he or her/his partner is in receipt of CA or is entitled to and would be in receipt of CA but for the fact that s/he is in receipt of a benefit which overlaps with CA. If a person has a partner who also receives a CA, then the additional carer’s amount is awarded twice. When a person’s entitlement to CA ends, the carer’s addition will continue for eight weeks.

Housing costs

A person may be able to get an additional amount of appropriate minimum guarantee in respect of housing costs. This is treated in the same way as the additional amounts detailed above, and will be added on to the standard minimum guarantee when calculating entitlement.

A person may get help with housing costs if s/he and/or partner:

	have eligible housing costs which include a home loan (ie mortgage interest and/or interest on loans for repairs and improvements), ground rent and service charges; and
	are liable to meet housing costs or treated as liable to meet them; and
	normally occupy the dwelling as their home.

To receive an additional amount for home loan payments in a guarantee credit award, a person must have a qualifying loan. A qualifying loan is:

	a mortgage (either to purchase a house or purchase an additional interest in the house); or
	a loan for repairs or improvements to the home, or for the payment of service charges to meet the cost of these.

The amount represents the weekly interest on a qualifying loan, and is calculated in a particular way. The level of support for mortgage interest and repairs and improvements is restricted to total loans below an upper limit of £100,000.

Note: A loan taken out to make adaptations to a house for a disabled person will not count towards the £100,000 limit.

Where a person qualifies for housing costs, s/he will get help straightaway.

Loans for repairs and improvements

A person can get help with a loan for repairs or improvements to maintain her/his current home in a habitable condition. Payment of interest on a loan will be made on loans taken out for:

	provision of a bath or shower, toilet, wash basin, and the necessary plumbing and hot water;
	repairs to a heating system;
	damp-proof measures (this may include repairs to a roof);
	provision of ventilation and natural lighting;
	provision of drainage facilities;
	facilities for preparing and cooking food (but not for storing it);
	home insulation;
	provision of electric lighting and sockets;
	storage facilities for fuel or refuse;
	repairs of unsafe structural defects;
	adaptations for a person with a disability;
	providing separate bedrooms for children of different sexes aged ten or over but under 20 who are part of the family. (It could be argued it should apply where one child is aged ten or over and the other will be ten in the near future).

Housing costs will only be payable on a loan taken out to pay for any of the above repairs. Housing costs will not reimburse a person for expenditure from her/his own resources for the above repairs. Where a loan also covers other repairs not included above, housing costs will only be paid for the proportion which relates to the items listed above. Any housing costs payable for the above repairs and improvements will be calculated in the same way as for mortgages.

Reduction in payments

The amount of housing costs payable may be reduced where a person:

	moves into more expensive accommodation;
	occupies accommodation too big for her/him and partner;
	has accommodation located in an area which is more expensive than other areas where suitable accommodation is available or the housing costs are higher than on other properties in the area;
	has a non-dependant who normally lives with her/him. A set deduction is made, depending on the non-dependant’s income. Where the non-dependant is aged eighteen or over, is in full-time (sixteen hours or more per week) paid work, and her/his income falls into one of the brackets below, the corresponding deduction is made from the person’s housing costs.

Gross income	Weekly deduction
£353 or more	£47.75
£283-£352.99	£43.50
£213-£282.99	£38.20
£164-£212.99	£23.35
£111-£163.99	£17.00
Less than £111	£7.40

In all other circumstances, a weekly deduction of £7.40 will be made. A deduction of £7.40 will be made for a non-dependant in receipt of PC, regardless of weekly income.

Note: Where a person is aged 65 or over, any change in a non-dependant’s circumstances which reduces the award of housing costs will not take effect until 26 weeks after the change has occurred.

No deduction is made in respect of a non-dependant who is:

	sixteen or seventeen years of age;
	under 25 years of age and in receipt of Income Support or JSA (IB);
	a full time student during period of study. If the person claiming or her/his partner is aged 65 or over, no deduction is made for a non-dependant who is a full time student whether during a period of study or not;
	in receipt of a Work-based Learning for Young People Allowance;
	not living with the person claiming at present because s/he has been in hospital for more than 52 weeks (periods in hospital which are not more than 28 days apart are added together when considering the 52 week period), or is in prison;
	a co-owner or joint tenant;
	normally residing elsewhere;
	in receipt of PC.

No deduction is made if the person claiming or her/his partner is registered blind or treated as registered blind for the disability additional amount, or is getting Attendance Allowance or the care component of DLA, regardless of the status of the non-dependant.

2.2.2 Step 2: income

Income is calculated on a weekly basis for guarantee credit. Income includes earnings, benefits and tax credits and other income such as maintenance and income from capital.

2.2.2.1 Earnings

A person can claim a guarantee credit and be working at the same time. There is no limit on the number of hours a person can work and continue to claim a guarantee credit. However, the earnings do count as income. Net earnings (ie earnings after deductions of tax, national insurance and half of any contribution paid toward a personal or occupational pension) will be taken into account in full, less any amount which is to be disregarded.

Earnings include:

	any bonus, commission or tips;
	holiday pay;
	sick pay;
	statutory maternity, paternity or adoption pay;
	any payments made by an employer for expenses not wholly, exclusively and necessarily incurred in carrying out the job;
	any payment in lieu of notice.

Earnings disregard

The following amounts are disregarded from earnings.

Any earnings derived from employment which ended before the day of entitlement to PC began are ignored.

Disregard £20 where a person or her/his partner:

	is a lone parent;
	is employed as a part-time firefighter, auxiliary coastguard, part-time crew of a lifeboat or member of the territorial army; part-time RIR or part-time PSNI;
	is entitled to carers additional amount;
	is in receipt of long term Incapacity Benefit, Severe Disablement Allowance, Attendance Allowance, DLA, any mobility supplement or the disability or severe disability element of WTC;
	is registered as blind or treated as registered as blind;
	had an earnings disregard of £20 in Income Support or JSA (IB) and that previous award was not more than eight weeks before the date s/he or her/his partner first became entitled to PC, and the employment which the disregard applies to continues after the end of the previous award of Income Support or JSA. The disregard will continue to apply so long as there is no break of more than eight weeks in entitlement to PC or in employment;
	immediately before reaching pensionable age, had an award of PC and a disregard of £20 because the person or her/his partner was in receipt of long term Incapacity Benefit or Severe Disablement Allowance. The disregard continues to apply so long as there is no break of more than eight weeks in entitlement to PC.

A person can only have a maximum of £20 disregarded from her/his earnings, even if s/he qualifies under different parts or has a partner who qualifies as well.

If a person does not qualify for a £20 disregard then the following disregards apply:

	for a single person, disregard £5;
	for a couple, disregard £10.

2.2.2.2 Benefits and tax credits

The benefits and tax credits ignored completely when calculating income are:

	DLA;
	Attendance Allowance;
	Constant Attendance Allowance and Exceptionally Severe Disablement Allowance;
	Child Special Allowance;
	Guardian’s Allowance;
	any increase for a dependant payable under Part IV of the Social Security Contributions and Benefits Act 1992;
	Social Fund payments;
	Child Benefit;
	Housing Benefit;
	Bereavement payments;
	Christmas bonus for pensioners;
	Child Tax Credit.

The following benefits count as income but have a £10 disregard:

	War Disablement Pension;
	War Widow(er)’s or Surviving Civil Partner’s Pension;
	Widow(er)’s or Surviving Civil Partner’s Pension payable to the partner of a member of the Royal Navy, Army or Air Force who was disabled or died as a result of service in the armed forces;
	any payment made to compensate for non-payment of the above pensions;
	similar pensions paid by other countries;
	pension from Germany or Austria paid to victims of Nazi persecution;
	Widowed Parent’s and Widowed Mother’s Allowance.

The following benefits and tax credits count in full as income:

	Category A, B, C or D Retirement Pension;
	shared additional pension;
	a Graduated Retirement Benefit;
	any age addition;
	income from an occupational or personal pension scheme;
	income from an overseas arrangement;
	income from a retirement annuity contract;
	income from annuities or insurance policies purchased or transferred for the purpose of giving effect to rights under a personal pension scheme or an overseas arrangement;
	income from Annuity Contracts (other than retirement pension income);
	Working Tax Credit;
	payments made under the Financial Assistance Scheme Regulations 2005.

All other social security benefits count in full as income.

2.2.2.3 Other income

Maintenance

Payments received towards the maintenance of a person or her/his partner by a spouse/civil partner or former spouse/civil partner count in full as income, whether made by court order, agreement or voluntarily.

Child maintenance is ignored for guarantee credit.

Letting

Rent from properties other than a person’s home is not counted as income. However the property may be deemed as capital and therefore generate an assumed income (see capital, below).

Where a person has an agreement to let out part of the home in which s/he currently resides, up to £20 of the rent can be disregarded.

Board and lodging

Where a person provides meals to a boarder or lodger the first £20 of the weekly charge is ignored and half of the remaining balance will be taken into account as income.

This disregard does not apply where the boarder or lodger is a close relative or is not staying on a commercial basis.

Equity release schemes

An equity release scheme is such that a lender forwards sums of money to a person and these payments are secured on a home that the person owns.

Regular payments will be treated as retirement pension income and will normally count in full as income. However, where payment commences within an assessment income period, the income will be ignored until the claim is reassessed at the end of the assessed income period.

Irregular lump sum payments will be considered as capital.

Capital

There is no upper capital limit for guarantee credit. If a person and/or her/his partner have capital over £6,000 (or £10,000 if resident in a care home), they are deemed as having an assumed weekly income of £1 for every £500 (or part of £500) of capital over £6,000 (or £10,000).

Notional capital

A person will be treated as possessing capital s/he does not actually have if s/he has deprived her/himself of capital in order to obtain benefit, or obtain benefit at an increased rate. This is known as the notional capital rule.

For the notional capital rule to apply, the decision maker would have to show that the person deprived her/himself of the capital with the intention of obtaining benefit or obtaining benefit at a higher rate. If the capital is disposed of by reducing or paying off a debt owed by the person claiming, or by reasonable expenditure on purchasing goods or services, then it will not be regarded as deprivation in order to obtain benefit.

2.2.2.4 Assessed income period

PC rules enable certain types of income known as ‘retirement provision’ to be treated as remaining the same for an assessed income period of up to five years (or seven years if a person transferred on to PC from Income Support on 6 October 2003 and the person or her/his partner was 65 on or before that date). The assessed income period will not be applied if one member of the couple is under 60 or the payment of an element of retirement provision has temporarily stopped.

Retirement provision is defined as income from:

	Retirement Pension (other than a Retirement Pension paid under the Contribution and Benefits Act);
	annuity contracts;
	capital;
	Pension Protection Fund periodic payments.

A person does not have to notify any increase or subsequent receipt of retirement provision during the assessed income period. Where the terms of retirement provision allow for periodic increases in retirement provision and the dates and amounts of the increases have been notified to the Pension Credit office, benefit will be automatically adjusted in line with these terms. Where the terms allow for periodic increases but dates and amounts are unknown, adjustment of benefit will be in line with the social security uprating for additional pensions. No adjustment will be made where retirement provision does not allow for periodic increases. The claim will be reassessed at the end of the assessed income period and any income adjustments (including that from retirement provision) will be applied in the following assessed income period. However, any decreases or cessation of retirement provision should be notified and, where necessary, entitlement will be increased accordingly.

All other changes in circumstances should be notified to the PC office as soon as possible. If a person fails to notify a change of circumstances, an overpayment could occur. Therefore it may be beneficial to report all changes in circumstances, including those that affect retirement provision, to ensure that no unnecessary overpayments are subsequently raised.

The current assessed income period will end if a person:

	becomes a member of a couple;
	ceases to be a member of a couple;
	or partner, reaches the age of 65;
	who is single, enters a care home on a permanent basis;
	has a retirement pension which reduces or stops temporarily.

2.2.3 Step 3: deduct income from appropriate minimum guarantee

The amount of a person’s guarantee credit is the amount of her/his appropriate minimum guarantee less the total income. If a person’s income is higher than the appropriate minimum guarantee, then s/he will not be entitled to any amount of guarantee credit. S/he may however be entitled to an amount of savings credit. If a person’s income is lower than the appropriate minimum guarantee, then deduct the income from the appropriate minimum guarantee to get the amount of guarantee credit s/he is entitled to.

2.3 Example 1

Ms B is single, age 74, lives alone in private rented accommodation. Her only income is her retirement pension of £87.30 and Attendance Allowance.

Guarantee credit

Standard minimum guarantee	£119.05
Additional amount: severe disability	£48.45
Appropriate minimum guarantee	£167.50
Income: retirement pension	£87.30
Appropriate minimum guarantee	£167.50
Less income	£87.30
Guarantee credit	£80.20

Mrs B is entitled to a guarantee credit of £80.20.

2.4 Example 2

Jack aged 70 and Vera aged 66 live together and are owner occupiers. They are both in receipt of Attendance Allowance. Jack has a retirement pension of £87.30 and Vera receives £52.30. From this they have to pay their mortgage of £126 per month to the building society for interest and £26 per month to an endowment company.

Guarantee credit

Standard minimum guarantee	£181.70
Additional amount: