What happens to the pension credit when you start to receive a government pension?

I am a Waspi woman born in November 1954. My husband and I get pension credit, and he receives care allowance for neurological disease, so I get carer allowance.

I stopped my full-time job at 60 to take better care of him.

When I receive my government pension in November, do you think it will be deducted from our pension credit? Unfortunately, the Ministry of Work and Pensions does not give me a clear answer.

Funding for retirement: what will happen to our pension credits when I start to receive a state pension?

In other words, can I expect an increase in our monthly income, or should I assume that my pension will be offset by a pension credit and our income will stay the same?

I think I feel it will stay the same and that the pension credit only serves to supplement the income the government believes a couple should live on monthly?


Steve Webb responds: Thanks for your question. Starting to receive a state pension will indeed affect your pension credit.

Whether your situation is better overall will depend on how much you currently receive and how it has been worked out.

But it might be helpful for you and other readers if I explained how pension credit works because there are a lot of people who don’t even claim and miss out on large sums of money.

Steve Webb: Find out how to ask the former Pensions Minister a question about your retirement savings in the box below

Steve Webb: Find out how to ask the former Pensions Minister a question about your retirement savings in the box below

The idea of ​​pension credit is to bring your household income to a minimum level. For a single person in 2020/21, the target level is £ 173.75 and for a couple, £ 265.20.

Higher rates may apply to people with disabilities or caregivers, although the rules are complex.

The pension credit is intended as a “top-up” for the other sources of income you have. If your total income from your income and pensions is below the target level, you will generally be entitled to a top-up payment to bring your total income to that level.

A consequence of this is that each pound of state pension you receive will likely mean one pound of pension credit less.

Certain sources of income are ignored when establishing your pension credit and this includes attendance allowance. The first £ 5 per week of any income is also ignored.

The target income level I referred to is provided by what is called the “guarantee credit”. In addition, for those who reached retirement age before April 6, 2016, there may be an additional payment called a “savings credit”.

The way this is worked out is complex, but it is designed to ensure that those who have made savings during their working life (for example, in a company or a private pension) do not benefit from a pound-for-pound deduction of their pension credit.

The pension credit valuation also takes your capital into account – these are things like stocks, Isas, and money in the bank.

Capital below £ 10,000 is ignored, but every additional £ 500 of capital above that level is deemed to generate £ 1 per week of income, regardless of how you actually invest it. There is no capital limit.

One of the great advantages of applying for pension credit (and in particular receiving guarantee credit) is that it can act as a “passport” to various other forms of assistance.

This can include paying your rent, getting a free TV license at age 75 (once the BBC implements the planned changes), and help with fuel bills through the Warm Home Discount program. .

It is difficult to give you a precise answer as to what will happen to you because in addition to starting to receive the state pension, I assume that your entitlement to care allowance will cease (because of the so-called “rules” accumulation of benefits ”).

I also don’t know if you get a savings loan that would change the math.

The best thing to do is probably think about what your income will be from different sources in November and put it into an online calculator such as www.entitledto.co.uk and that should help you see what pension credit it is. you will stay with.


Former Pensions Minister Steve Webb is This Is Money’s Agony uncle.

It’s ready to answer your questions, whether you’re still saving, quitting work, or juggling your finances in retirement.

Steve left the Department for Work and Pensions after the May 2015 election. He is now a partner in the actuarial and consulting firm Lane Clark & ​​Peacock.

If you would like to ask Steve a question about pensions, please email him at [email protected]

Steve will do his best to respond to your post in a future column, but he won’t be able to respond to everyone or correspond privately with readers. Nothing in his responses constitutes regulated financial advice. Posted questions are sometimes edited for brevity or other reasons.

Please include a daytime contact number with your message – it will be kept confidential and will not be used for marketing purposes.

If Steve is unable to answer your question, you can also contact The Pensions Advisory Service, a government-backed organization that offers free assistance to the public. TPAS can be found here and its number is 0800 011 3797.

StevWe receive many questions about the state pension forecast and about COPE – the equivalent of contracted retirement. If you write to Steve on this topic, he answers a typical reader question. here. It includes links to several of Steve’s previous columns on state retirement forecasting and contracting out, which might be helpful.

If you have a question about state pension supplements, Steve wrote a guide that you can find here.


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