State pensioners are being cautioned about a £10,000 savings threshold that could impact their entitlement to Pension Credit. The warning highlights how savings above this amount can reduce weekly benefits.
Understanding the Savings Limit
Pension Credit provides up to £238 per week for single individuals and £363.25 per week for couples with low incomes. However, those with savings exceeding £10,000 will see their payments reduced. For every £500 above the threshold, the benefit decreases by £1 per week.
For example, if someone has £11,000 in savings, their weekly Pension Credit is reduced by £2. The government’s website states: "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."
Expert Criticism
Stephen Lowe, director at retirement specialists Just Group, warned that the £10,000 limit could cause pensioners to lose money and have benefits reduced. He 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."
Lowe 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 per cent 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."
Eligibility Considerations
While there is no fixed savings cap, having substantial savings can render pensioners ineligible for Pension Credit. For instance, someone with £110,000 in savings would have £100,000 above the threshold, significantly reducing their benefit. However, individual circumstances vary based on state pension calculation, National Insurance record, savings, and other income.
Pensioners are advised to review their savings and seek guidance to understand how the rules apply to their situation.
