You are here:

Other benefits

Pension Credit Guarantee Credit

The Pension Credit Guarantee Credit is a top-up benefit payable if your income is below a level set by law. You must have reached the qualifying age to make a claim. Between 2010 and 2020, this age will move gradually from 60 to 65. If you (or your partner) are over 65, Guarantee Credit can be paid with Savings Credit, if you qualify for it.

Guarantee Credit is worked out by comparing your weekly income from all sources after tax, plus any income you are assumed to get from any capital that you have over £10,000 (called "tariff income") to what the law says someone in your situation needs to live on. This is called the appropriate minimum guarantee. It's made up of elements called the standard minimum guarantee, additional amounts and housing costs. See below for more information.

The standard minimum guarantee depends on whether you're single or you're claiming for yourself and your partner. The amount that the law says you need to live on can also be increased by additional amounts if you or your partner (or both) are severely disabled or if either (or both) of you care for someone with a disability. See additional amounts, below.

If you're responsible for paying a mortgage, what the law says you need to live on may include help with your mortgage interest payments, but not capital repayments or endowment policy payments. For more information, see the section on housing costs, below.

Once all these elements have been considered, Guarantee Credit is worked out by comparing your appropriate minimum guarantee to your income. If your income is below what the law says you need to live on, you will be paid a top-up of Guarantee Credit. This calculation is done by the Pension Service when it has all the information it needs from you to make a claim.

Even if the amount of Pension Credit that you are paid is quite small, it is still worth claiming because it also entitles you to significant extra help, such as full Housing Benefit if you rent your home, Council Tax Reduction, and access to grants and loans from the Social Fund.

Calculating Pension Credit entitlement can be quite complicated, but if you make a claim, the Pension Service will work out your entitlement from the information that you give. You can seek independent help and advice to work out your entitlement. Even if you think you're unlikely to qualify, you can enquire further.

Click on the boxes below for more detailed information on eligibility for Pension Credit.

Appropriate minimum guarantee

The minimum that the law says you need to live on in your particular circumstances is called the appropriate minimum guarantee. This is made up of three different parts: standard minimum guarantee, additional amounts and housing costs.

The first part is called the standard minimum guarantee. If your weekly income is below this level, you can receive a top-up of Guarantee Credit.

In addition to the standard minimum guarantee, you may also qualify for additional amounts that will increase the amount that the law says you need to live on. If you get Disability Living Allowance at the middle rate or higher rate for care, or you get Attendance Allowance, you may qualify for additional amounts. It is possible for a couple to qualify for two payments of this amount. However, the rules for getting it are complicated and not everyone will get this payment.

If you are the full-time carer for a disabled person, you may get the carer additional amount. In addition to the standard minimum guarantee and any additional amounts, you may also qualify for help with housing costs. These are payable if you're responsible for paying a mortgage and associated costs. Only mortgage interest is payable (not capital repayments or endowment payments), and at a set rate that is not necessarily what your lender is charging.

The standard minimum guarantee

The standard minimum guarantee is the starting point of working out if you're entitled to the Guarantee Credit. If you're not severely disabled or a carer and you do not have housing costs to meet, the standard minimum guarantee is the amount that the law says you need to live on if you've reached the qualifying age.

The weekly figure for the standard minimum guarantee depends on whether you're single (£145.40) or you have a partner (£222.05 per couple).

Example

Helen and Bernard are both 64 years old. They have pensions of £150 weekly, but no other income. They have a small amount of savings (under £6,000) and they no longer have a mortgage.

Their standard minimum guarantee is £222.05. When this is compared to their income of £150, they can get £72.05 a week Guarantee Credit. They will also receive extra help, such as Council Tax Reduction.

Pension Credit and additional amounts

Additional amounts can be added to the standard minimum guarantee as part of working out your entitlement to Pension Credit. They are only payable if you're a carer or you're severely disabled.

These additional amounts can be paid together, as it is possible to be both a carer and a person who is severely disabled. It is also possible for a couple, where both partners are disabled, to be each other's carers and to be eligible for additional amounts.

Severe disability additional amount

You can receive severe disability additional amount (of £59.50) if you are single and all of the following apply to you:

  • You receive the middle or higher rate of the care component of Disability Living Allowance (DLA) or Attendance Allowance (AA).
  • You live alone. 
  • No one is paid a Carer's Allowance for looking after you. This means that it is possible for you to have a carer but if they claim and get paid Carer's Allowance, you will not be able to add the severe disability additional amount to your Pension Credit. However, if they're not being paid Carer's Allowance because, for example, they're getting a State Pension and Carer's Allowance cannot be paid because of the overlapping rules, then the severe disability addition can still be paid.

If you have a partner, the severe disability additional amount is payable at the "single" rate if you're both on Disability Living Allowance middle or higher rate or Attendance Allowance, but one of you has a carer who receives Carer's Allowance for looking after you. It is also payable at the single rate if one of you is on DLA middle- or high-rate or AA and the other is registered blind.

The severe disability additional amount is payable at the "couple" rate of £119.00 if both of you get DLA middle or higher rate or AA and nobody is paid Carer's Allowance for looking after you.

In all these cases, you will lose the payment if you have a member of your family (such as a grown-up son or daughter) living with you who is a "non-dependant". If someone pays you rent (a tenant or lodger) for living in your home, they are not counted as a non-dependant, but any rent you receive affects your benefit.

Carer additional amount

The carer additional amount of £33.30 can be added if you receive Carer's Allowance for looking after a disabled person. It is possible to get this amount if you care for your disabled partner. It is also possible for both members of a couple to receive a carer's additional amount, if they meet the rules. They could even be each other's carer.

Being a carer can create a complicated situation because of overlapping benefit rules. These rules mean that you cannot claim, for instance, both Carer's Allowance and a State Pension at the same time (see the section called Carer's Allowance adult dependant increase on overlapping benefit rules).

If you're entitled to more than one overlapping benefit, you will normally be paid the benefit that pays you the most money. If you're entitled to a State Pension, this is usually worth more than Carer's Allowance. However, it may still be worth claiming Carer's Allowance in this case, even though you won't be paid it because it will allow you to be paid the additional amount for being a carer.

In addition, because you are not actually paid a Carer's Allowance, the person you're looking after may still be able to be paid the additional amount (see above).

Once you know any additional amounts you're entitled to, check your entitlement to housing costs (see below).

Housing costs

Housing costs are part of your appropriate minimum guarantee when your entitlement to Pension Credit is worked out. Housing costs are payable for the home in which you (and your partner, if you have one) normally live, and they refer to mortgage and associated costs, not rent. For help with rent, see the section on Housing Benefit.

Help can be given with the cost of:

  • interest on your main mortgage
  • interest on secured loans for improvements and repairs (but only those approved by the DWP)
  • some service charges (usually charges that are shared, not ones that are individual to you)
  • ground rent (for leaseholders)

Help is only given on mortgage interest. If you're repaying capital on your mortgage or you have to pay an endowment insurance policy, you will not get help with these.

You may also not be paid the interest rate that your lender is charging. The interest rate payable in Pension Credit is set by law. The rate is subject to review, depending upon changes in the housing market.

Help is also limited to the first £200,000 of your mortgage.

If mortgage help is included in your Pension Credit, it will usually be paid straight to your mortgage lender, so it will not be included in the money you get.

You may also have your mortgage help reduced if you have a non-dependant living in your home. This is someone, such as an adult son or daughter, who lives in your home but is not part of your benefit claim and is not a commercial tenant or lodger. If a non-dependant lives with you, your mortgage help could be reduced by between £9.40 and £60.60 a week, depending on their age and how much they earn.

This reduction in mortgage help will not apply if you or your partner get the care component of Disability Living Allowance or Attendance Allowance, or if you or your partner are registered blind.

The reduction will also not apply if the non-dependant is under the age of 25 and gets Income Support, income-based Jobseeker's Allowance, the income-related Employment and Support Allowance, or if they're an older relative who gets Pension Credit.

Because of the limits on mortgage help, you will often find that it does not cover your full monthly mortgage payment and you will either have to find the extra money yourself or seek help if you're struggling to pay.

The rules for housing costs have recently been changed. Some of the arrangements are temporary and the Pension Service is currently updating its computer systems to make sure everyone is being paid correctly.

How your income affects a Pension Credit claim

The Pension Credit is a top-up benefit made up of the Guarantee Credit and the Savings Credit. The two parts of the Pension Credit work in different ways, but they both take your income and the effects of your capital into account. Both types of Pension Credit count your weekly income, net of tax and other deductions.

Guarantee Credit is awarded if your income is below a level set by law. Not all of your income is counted when Guarantee Credit is calculated, although you need to advise the Pension Service of your total income in order to ensure your benefit is worked out properly. For example, Disability Living Allowance and Attendance Allowance are not counted as income, but they can make you better off, entitling you to additional amounts of Guarantee Credit.

Different types of income may be taken into account in full, partially disregarded, or fully disregarded.

How earnings are treated

Your weekly earnings – on average, if they change from week to week – are counted, minus your tax and any National Insurance (NI) payments, plus half of any contribution you make to a private pension scheme. The Pension Service will also disregard a small extra amount of your weekly income, which is £5 if you're single, £10 if you're part of a couple, or £20 if:

  • you're a lone parent
  • you're a part-time firefighter, auxiliary coastguard, lifeboat crew, member of the Territorial Army or reserve force
  • you're a carer
  • you get long-term Incapacity Benefit, Severe Disablement Allowance, Disability Living Allowance or Attendance Allowance
  • you're registered blind
  • you were previously claiming Income Support, income-based Jobseeker's Allowance or Employment and Support Allowance, and you qualified for a £20 disregard through one of these benefits within the eight weeks before you became entitled to Pension Credit

You will only get one earnings disregard, and this will be whichever is the highest one that applies to you. The rest of your earnings will count as income.

Income taken into account in full for Guarantee Credit:

  • state retirement pension
  • private pension(s)
  • occupational pension(s)
  • contribution-based Employment and Support Allowance
  • contribution-based Jobseeker's Allowance
  • maintenance payments (but not maintenance for children)
  • Severe Disablement Allowance
  • Bereavement Allowance
  • Carer's Allowance
  • Incapacity Benefit
  • Industrial Injuries Disablement Benefit
  • Maternity Allowance
  • Working Tax Credit

Income that is completely disregarded:

  • Disability Living Allowance
  • Attendance Allowance
  • Constant Attendance Allowance (under the Industrial Injuries Benefit scheme)
  • Housing Benefit
  • Council Tax Benefit
  • Child Tax Credit
  • Guardian's Allowance
  • Social Fund payments
  • Child Benefit (and any amounts paid for children as part of non-means-tested benefits)
  • Christmas bonus

Income with £10 disregarded:

  • Widowed Parent's Allowance
  • Widowed Mother's Allowance
  • War Disablement Pension
  • War Widow/Widower's Pension
  • Payments to compensate for Nazi persecution (made by the German or Austrian governments)

There are more rules regarding other income, such as income from charities or payments from family and friends. Most of these are not taken into account.

Income from tenants, lodgers and trustees

The Pension Credit is a top-up benefit made up of the Guarantee Credit and the Savings Credit. The two parts of the Pension Credit work in different ways, but they both take your income and the effects of your capital into account. Both types of Pension Credit count your weekly income, net of tax and other deductions.

Pension Credit may count some of your income in full, or it may take only part of the income into account, or it may disregard all of the particular income.

Income from tenants and lodgers

If someone rents a room from you but you don't provide food (board) for them, £20 of this rent is ignored and the rest counts as income. If you rent a room out and provide food (board), the first £20 of this rent is ignored and half of the remainder counts as income. However, if your boarder is a close relative of yours or is not paying a commercial rate of rent, this will not apply.

Some forms of income are completely disregarded, including:

  • payments made to you by charities
  • voluntary payments (payments given without the giver expecting anything from you in return)
  • expenses paid to volunteers (but if you're paid more than just your expenses, this may be counted as earnings and will affect your Pension Credit)
  • fostering allowances, adoption allowances and residence order payments
  • respite care payments
  • supporting people payments
  • child maintenance payments (but if the maintenance is for you, not for a child, it can count as income)
  • payments made to you by your family or friends

Payments made by trustees

Such payments will generally be ignored, but if they are intended to cover costs for ordinary clothing and footwear, rent, council tax, water charges or other housing costs or care home fees, they will count as income after the first £20.

If your income is from one of these more unusual sources, you may wish to seek help and advice to clarify how it will be treated.

How your capital can affect a Pension Credit claim

If you have less than £10,000 in capital, there is no effect on your entitlement to Pension Credit. There is no upper limit on the amount of capital you are allowed to have, but if you have more than £10,000, you will be assumed to have an income from your savings. This is called a tariff income.

It will be assumed that you get income from this, even if you do not actually receive any money. If you have a partner, their capital is counted as well as yours.

You are assumed to have £1 a week of income for every £500 (or part of £500) of capital over £10,000. So if you have £14,000 savings, the first £10,000 will be ignored and £4,000 will attract tariff income. It will be assumed that you have £8 a week in tariff income, which will reduce your entitlement to Pension Credit.

What counts as capital?

Most forms of savings and investment are counted, such as money that you have in a bank or building society, cash savings, PEPs and ISAs, stocks, shares, National Savings certificate and money gained from equity release schemes.

What does not count as capital?

Your personal possessions and the house or flat you live in do not count as capital, even if you own the house. If you have left your home, its value may still be ignored for a time, for instance if you're trying to sell it or are making repairs.

If you own other property, this may affect your claim, but a property that is occupied by a close relative of yourself or your partner who is over 60 will not count. The same applies if the property is occupied by someone who is incapacitated. This usually means they are on disability-related benefits, but other people may also be seen as incapacitated.

Money held in a trust is not counted, but if you receive a payment from that trust, this may count. Payments made from a charitable trust may not count.

Money paid to you as compensation for personal injury is not counted, whether or not it is in a trust. The value of a funeral plan is ignored.

Any compensation payment for victims of forced labour, personal injury or loss of property during World War II is ignored. If you have been paid compensation because you (or your partner) were a Japanese prisoner of war in World War II, £10,000 of this is ignored.

What if I get rid of capital?

Be wary of getting rid of capital in order to qualify for Pension Credit or to increase your award, as you may be treated as still having it and your benefit will be calculated accordingly. This is called "notional capital".

You can reduce your capital without this happening if you're paying off or reducing debts, or if you pay for goods and services and it is reasonable in your circumstances to do this.

When is Pension Credit paid?

Pension Credit is usually paid weekly in advance on the same day as your State Pension.

The date of your Pension Credit claim

If you have sent in a form, your claim starts from the day the form was received by the Pension Service. You may need to supply extra evidence to support your claim, but your "date of claim" stays the same provided you supply this evidence, usually within a month.

Your date of claim will be earlier if you contacted the Pension Service to ask about claiming and you then make a claim within a month. Your claim will start from the date that you showed an intention to claim, such as when you returned the tear-off slip from the PC1L form.

If you claim by phone, your claim starts from the date of your phone call.

Evidence to support your Pension Credit claim

You need to provide your National Insurance (NI) number. You may be asked for proof of your income and capital and that of your partner, if you have one (such as from pension slips, wage slips, bank statements) or other aspects of your claim. If you provide this within one month, your date of claim is not affected. If you cannot provide the extra information within a month, this time limit can be extended if it is reasonable to do this.

Claiming Pension Credit in advance

You can claim Pension Credit up to four months in advance. This means you can claim in advance of reaching your State Pension age, or if you're aware that your circumstances are going to change in the near future, for instance if your income is going to reduce. The application form asks you the date from which you want to claim, so use this to make a claim in advance.

Backdating your Pension Credit claim

You can ask for your claim to be backdated by up to three months. You must request this as it is not automatic. You only have to show that you were entitled to Pension Credit for that period and do not have to give reasons why you did not claim earlier. The application form asks you the date from which you want to claim and you can use this to request backdating.

Minimum payment of Pension Credit

If you're entitled to less than £1 Pension Credit, you may be paid quarterly in arrears. The minimum Pension Credit you can get is 10p a week, and if your entitlement is less than this it will not be paid unless you get another benefit that can be paid with Pension Credit.

Ratings

How helpful is this page?

Average rating

Based on 35 ratings

All ratings

Add your rating

Comments

Page last reviewed: 20/05/2013

Next review due: 20/05/2015

Call Carers Direct on 0300 123 1053

Confidential information and advice for carers.

Lines are open 9am to 8pm Monday to Friday (except bank holidays), 11am to 4pm at weekends. Request a free call back or an interpreted call back in one of more than 170 languages including ربي, বাংলা, 中文, Français, ગુજરાતી, Polski, Português, ਪੰਜਾਬੀ, Soomaali, Español, Türkçe and .اردو.

You can talk to an adviser live online or send a query by email.

Find out more about the Carers Direct helpline.

Services near you