State Pensioners Alerted to £10,000 Savings Threshold Affecting Pension Credit
State pensioners across the UK are being issued a crucial warning regarding a £10,000 savings limit that could significantly impact their eligibility for Department for Work and Pensions (DWP) Pension Credit. This financial threshold, which has remained static since 2009, is drawing criticism from retirement experts who argue it unfairly penalises those with modest savings.
How the £10,000 Savings Limit Works
If you have £10,000 or less in savings and investments, this will not affect your Pension Credit at all. However, if your savings exceed £10,000, every £500 over that limit counts as £1 of income per week. For example, if you have £11,000 in savings, this translates to £2 of income per week, which can reduce the amount of Pension Credit you receive.
Important considerations include:
- If you are entitled to a personal or workplace pension but have not yet claimed it, the expected amount still counts as income.
- If you have deferred your State Pension, the amount you would receive is counted as income.
- You cannot build up extra amounts for deferring your State Pension if you or your partner are receiving Pension Credit.
Expert Criticism of the Unchanged Limit
Stephen Lowe, director at retirement specialists Just Group, highlighted the inequity of the system. "The £10,000 lower capital limit means that every £500 of savings – not including the main residential property – held by people who qualify for pension credit counts as £1 income a week, which can erode the income received from the benefit," he explained.
"This feels unfair on two fronts given many pensioners will aim to keep a rainy-day fund in the event of emergency repairs or a large, unexpected cost. It is the equivalent of a 10.4% interest rate. Secondly, the limit has not moved since 2009 and it is likely therefore that more and more people are seeing their benefit income reduced as they fall into this bracket."
Additional Guidance from Age UK
Age UK adds further clarity, noting that if you reached State Pension age before 6 April 2016 – or if you're a couple and both of you did – you might be eligible to claim Savings Credit. They emphasise that while there isn’t a strict savings limit for Pension Credit, having over £10,000 in savings will affect how much you receive.
It is also important to note that you can continue to get Pension Credit if you’re away from Great Britain for 4 weeks or less, such as during a holiday. This provision ensures that temporary absences do not disrupt essential benefits for pensioners.
This warning comes amid broader discussions on pension reforms, with experts urging a review of the savings threshold to better reflect current economic conditions and protect the financial security of older citizens.
