State pensioners are being warned about a £10,000 savings limit set by the Department for Work and Pensions (DWP), which could impact their eligibility for Pension Credit, a benefit that can boost weekly income.
Pension Credit currently provides up to £238 per week to eligible pensioners, depending on their income, just a few pounds short of the full new state pension of £241.30 per week for those with a full National Insurance record. However, for those on the old basic state pension, the maximum is £184.90 per week, even with full contributions, making the top-up crucial for many older pensioners.
How the savings rule works
The key restriction is that if you have savings or investments totalling £10,000 or more, every £500 above that threshold counts as £1 of weekly income for Pension Credit calculations. This can reduce or even eliminate the benefit.
Stephen Lowe, director at retirement experts Just Group, told ThisIsMoney: "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 added: "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."
Examples and calculations
According to the government's official guidance: "If you have £10,000 or less in savings and investments, this will not affect your Pension Credit. If you have more than £10,000, every £500 over £10,000 counts as £1 income a week. For example, if you have £11,000 in savings, this counts as £2 income a week."
For instance, £110,000 in savings would mean £100,000 above the threshold, equating to £200 of weekly assumed income. Combined with a state pension of £184 per week, that would total £384, making the pensioner ineligible for Pension Credit.
Certain incomes are disregarded in the calculation, including Attendance Allowance, Personal Independence Payment (PIP), Disability Living Allowance, and other benefits like adoption or fostering allowances, a dependant child's income, or Scottish Carers Allowance Supplement.
Winter fuel payment update
One positive change is that Pension Credit is no longer required to claim a winter fuel payment, meaning pensioners over the savings limit can still receive it. However, the new £35,000 threshold for winter fuel payment eligibility counts savings interest as income, so those with high savings could still miss out on the £200 to £300 payment.
