Pension Credit

Pension Credit is the principal element of the UK welfare system for poorer people of pension age. It is intended to supplement the UK State Pension. It was introduced in the UK in 2003 by Gordon Brown, then Chancellor of the Exchequer (and subsequently Prime Minister). It has been subject to a number of changes over its existence, but has the core aim of lifting a large number of the poorest retired people out of poverty.

Eligibility may be estimated on a government website.

The scheme was introduced to replace the Minimum Income Guarantee, which had been introduced in 1997, also by Gordon Brown. Pension Credit had two elements:

The value of Guarantee Credit, and Savings Credit are automatically uprated each year, in line with inflation, as is the basic State Pension, and Second State Pension (S2P). However, they are uprated by different inflation measures:

The net, deliberate, effect of these differences is to make the total combined impact gradually converge, over about 40 years, to an eventual situation where the total benefit is around £140 a week, whatever an individual's circumstance. Consequently, the Coalition government proposed replacing this complex system with a single flat-rate pension of about £140 per week, a policy which is currently being processed by Parliament.

Savings Credit, which would be abolished by the flat-rate pension policy, is currently only claimed by around 1% of eligible individuals, and few people of eligible age are aware of its existence. As an interim measure, the Coalition government changed the uprating system, so that a higher levels of income would be obtained more automatically, instead of via Savings Credit:

Anyone who was in receipt of the Guarantee Credit part of Pension Credit was also eligible for full Council Tax Benefit, which covered the cost of their Council Tax bill. This rule was abolished in 2013, since Council Tax Benefit itself was abolished. Instead, Councils are now legally required to introduce different rates of benefit for certain categories of people, known as Council Tax Reductions (marketed by many councils as Council Tax Support); in particular the Council Tax rate for pensioners must be set to zero, if they are in receipt of Guarantee Credit.

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