I'm £3.51 over the limit to claim pension credit so lose hundreds of pounds' worth of other benefits - how is this fair? Steve Webb replies

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My husband is in hospital suffering with Alzheimer’s disease. He is 80 years old. I am told he might not live very long now.

I am looking into my finances to see what I will get when I only get my pension. I am surprised I just miss being able to claim pension credit by £3.51 per week.

My state pension is £170.93 and I get a small private pension of £9.68 per week.

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My query is why, by having a private pension, which I paid for whilst working and that takes me over the threshold by £3.51 a week, I’m worse off than someone else who can claim by being under £177.10

How can this be right when if you’re on less than £177.10 per week you’re entitled to no end of help, which makes me worse off than the person getting the minimum amount.

In real money I am worse off by hundreds of pounds, for example from a free TV licence, help with glasses and dentist bills, and so on.

Please could you explain why this is not in scale with the £3.51 I am over per week. I appreciate there has to be a line drawn somewhere but the way it is happening is most unfair to people like me.

SCROLL DOWN TO FIND OUT HOW TO ASK STEVE YOUR PENSION QUESTION   

Steve Webb replies: You have raised an important question about the way in which help for those on a low income in retirement is cut off at certain income levels.

As it happens, I think in your situation you may actually be entitled to pension credit (for reasons I will explain) but I will also address your wider question.

Focusing just on pension credit, the idea of the benefit is to make sure that no-one has to get by on an income below a certain minimum level.

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For 2021/22 this level is £177.10 per week for a single person and £270.30 for a couple.

Under the rules of the ‘guarantee credit’ element of pension credit, those with income below this level are topped up to the guaranteed minimum level.

In your case, your total income from your state pension and private pension is £180.61. As this is above the guaranteed minimum level you do not qualify for the guarantee credit.

Although you are a few pounds better off than someone on pension credit in terms of your weekly income, you are correct to say that those on the guarantee credit also qualify for things like free TV licences (if aged 75 plus), a ‘warm home discount’ on their fuel bills and so on, and this can leave them better off than you.

The problem is that these ‘passported benefits’ (as they are known) are on an all-or-nothing basis – if your income is under the guarantee credit level you get them in full, but if you are just a penny over you don’t get them at all.

This creates a kind of ‘cliff-edge’ in the system and you are the wrong side of that cliff edge.

It would in theory be possible to withdraw these passported benefits on a more gradual basis. For example, you could design a system so that those within (say) £10 per week of the guarantee credit level could get (say) half their TV licence paid.

But this would make the system much more complex and expensive to run, so in general these extra benefits are simply cut off above a certain level.

However, what may be good news for you, depending on how old you are, is that for those who reached state pension age before 6 April 2016 there is a second element to pension credit – the savings credit.

This is an additional payment which rewards those who have some private pension income apart from their state pension.

I have entered the two figures you supplied for your state and private pension into the gov.uk pension credit calculator, and have assumed you have no other savings, and it says you would be entitled to a weekly top-up, presumably via the savings credit system.

If this is correct (and I don’t have your full personal details so you would need to apply to make sure), then you would at least get some extra help.

According to the gov.uk website, anyone on pension credit aged 75 or over, even those only getting the savings credit, will also qualify for a free TV licence.

You would *not* automatically qualify for the warm home discount scheme, but your energy company may have other discounts for those on a relatively low income.

In addition, it is worth mentioning that even for those just above pension credit level, other income-related help may be available.

For example, if you are renting you may still get some help with your rent from your local authority, and you would almost certainly qualify for help on low income grounds with your council tax bills.

Finally, I was obviously very sorry to read that your husband is in very poor health.

In the event of his death it is possible that you may become entitled to a higher state pension and/or a widow’s pension from any company scheme of which he was a member, though this would of course affect any benefits you were then receiving.

Ask Steve Webb a pension question

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

He is ready to answer your questions, whether you are still saving, in the process of stopping work, or juggling your finances in retirement.

Steve left the Department of Work and Pensions after the May 2015 election. He is now a partner at actuary and consulting firm Lane Clark & Peacock.

If you would like to ask Steve a question about pensions, please email him at pensionquestions@thisismoney.co.uk.

Steve will do his best to reply to your message in a forthcoming column, but he won’t be able to answer everyone or correspond privately with readers. Nothing in his replies constitutes regulated financial advice. Published questions are sometimes edited for brevity or other reasons.

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

If Steve is unable to answer your question, you can also contact The Pensions Advisory Service, a Government-backed organisation which gives free help to the public. TPAS can be found here and its number is 0800 011 3797.

Steve receives many questions about state pension forecasts and COPE – the Contracted Out Pension Equivalent. If you are writing to Steve on this topic, he responds to a typical reader question here. It includes links to Steve’s several earlier columns about state pension forecasts and contracting out, which might be helpful.  

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