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Incapacity Benefit is to be replaced by Employment and Support Allowance:
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Pension Credit
LEGISLATION State Pension Credit
Act (NI) 2002 The State Pension
Credit Regulations (NI) 2003 The State Pension
Credit (miscellaneous amendments) Regulations (NI) 2004 INTRODUCTION
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:
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. 2. GUARANTEE
CREDIT
2.1 Entitlement
A person may be entitled
to a guarantee credit if s/he is:
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:
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:
2.2.1.1 Standard minimum guarantee
The amount of the basic
standard minimum guarantee is as follows. Amount
2.2.1.2 Additional amounts
The additional amounts
are as follows.
Amount
Where a person is
single, s/he will qualify for the lower rate of the severe disability additional
amount if:
Where
a person has a partner, s/he will qualify for the lower rate of the severe
disability addition if:
The higher couple rate of
the severe disability addition is payable where:
Where the person
claiming has someone aged eighteen or over residing with her/him, her/his
presence will be ignored where the person residing:
(Note:
Any member of her/his household is also ignored.)
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.
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:
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:
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.
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:
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.
The
amount of housing costs payable may be reduced where a person:
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:
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:
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:
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:
2.2.2.2 Benefits and tax credits
The benefits and tax
credits ignored completely when calculating income are:
The following benefits
count as income but have a £10 disregard:
The following benefits
and tax credits count in full as income:
All
other social security benefits count in full as income. 2.2.2.3 Other income
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.
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.
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.
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.
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).
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:
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:
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
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
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