Thousands of pensioners could be better off when they retire as the government launches a pension credit campaign to get more people to sign up for the £3,500 a year.
Pension credit is a benefit that supplements income at retirement, but must be applied for and is not paid automatically.
About one in three eligible pensioners loses an average of £3,500 a year as a result.
Now the government will launch a trial this summer that will directly target people who may be eligible for retirement credit and encourage them to apply.
Retirement credit: ‘letter of invitation’ application trial launched by DWP in 10 parts of the country
Older people living in households receiving rent allowance in 10 municipalities will receive ‘letters of invitation’ about the benefit, which supplements the income of the poorest pensioners.
The Department of Work and Pensions has just held a ‘week of action’, joining forces with charities and broadcasters to get people to check their eligibility and apply for pension credit.
Previous campaigns like this have led to a backlog in applying for pension credits. But if you make a claim that is ultimately successful, payments will be made retroactively despite any delay.
Pension credit is worth more than £3,500 a year on average, and there are currently 1.4 million applicants – but about one in three eligible pensioners do not apply.
If you are elderly and unwell, the weekly income with pension credit is topped up to a minimum of £201.05 for singles and £306.85 for couples. This can add up if you have a disability or caring responsibilities.
> How do you apply for a pension discount? See box below
In the test to contact and invite people to apply, 10 places were chosen as a sample of urban, rural, regional and national areas:
- Eastbourne
- Teignbridge
- Shuttle
- Charnwood
- The valley of the white horse
- Redcar and Cleveland
- Craven
- eg
- Powys
- West Lothian
Pensions Minister Laura Trott says: ‘We recognize the challenges some retirees face with the cost of living. Therefore, in addition to reducing inflation, promoting pension credit is also a priority.
“Talk to your elderly loved ones about a pension discount and let them see if they can qualify for this much-needed extra support.”
Pension credit is just below the level of the full ‘flat rate’ state pension for people retiring since 2016, worth £203.85 a week or £10,600 a year after rising 10.1 per cent in April
The old basic pension is now £156.20 a week or about £8,120 a year – but that is supplemented by the S2P and Serps supplementary state pension entitlements, if these have been earned during years of service.
You don’t need to get a state pension to qualify for a pension credit, and a rainy day fund of up to £10,000 will be disregarded if your income is low and you meet other rules.
Retirement credit also opens the door to lots of extra support, including cash payments on living expenses, extra help with utility bills, council tax, housing costs and free TV licenses if you’re over 75.
Rachel Vahey, head of policy development at AJ Bell, says: ‘Despite several past attempts to spread the word, the sad fact is that there are simply not enough people claiming retirement credit – an alarming 850,000 eligible retirees are estimated to be wrong.
“The Ministry of Work and Pensions has certainly stepped up this campaign. An action day last year has become an action week this year. And since the number of applications for pension credit doubled that day last year, expectations are high that the efforts will be even more successful this year.’
Vahey welcomed this summer’s trial to directly invite eligible households to claim, but says the government could do more.
“A freedom of information request last November revealed a backlog in processing pension applications,” she said.
‘Administrative difficulties should not prevent retirees from getting the help they need as quickly as possible.
‘The government must also continue to strive for people to know clearly when they can claim, myths are debunked and the claim form is as simple as possible.’
Dean Butler, general manager for retail direct at retirement savings company Standard Life, says retirement credit is a critical but often misunderstood benefit designed to help low-income people of retirement age.
“With inflation remaining stubbornly high, especially on essentials like food and energy, it is more important than ever that those hardest hit by rising prices use all available support.
‘A large number of potentially eligible pensioners are still not taking up a pension credit, but it’s worth more than £3,500 a year on average, so it could be a real help.
“Many people mistakenly think that if they have some savings or their own home, they are not entitled to pension credit, while others are concerned about a perceived stigma attached to claims.”
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