The New Pension Credit
12.From 2003, the new Pension Credit will replace the Minimum Income Guarantee. It consists of a guarantee credit and a savings credit and will include simpler administrative arrangements for claimants. It can be claimed by one member (but not both members) of a couple.
The guarantee credit
13.The guarantee credit will bring recipients' incomes to a guaranteed level and will be payable to both men and women at or over the age which is the minimum qualifying age for women to receive the basic state pension. This is currently 60 but, under the Pensions Act 1995, it is set to rise by stages to 65 between 2010 and 2020. The guarantee credit will subsume the premiums currently paid to carers and the severely disabled under MIG. Those pensioners without additional needs will receive the “standard minimum guarantee”, which, in 2003, is expected to be around £100 for a person who is not a member of a couple (a “single person”) and £154 for a married or unmarried couple (a "couple").
14.The Government announced its intention, in "The Pension Credit: a consultation paper" (Cm 4900), that the guaranteed income level of Pension Credit will keep pace with the growth of earnings over this Parliament and this was reaffirmed in “The Pension Credit: the Government’s proposals” published in November 2001.
15.For everyone aged 60 and over it is intended that regulations under the Act will end the assumed rate of return of £1 a week for every £250 of capital held. The intention is that a rate of return of £1 a week for every £500 will be applied to capital that exceeds £6,000 (£10,000 in the case of people in residential care and nursing homes). Capital below this amount will not be taken into account in the assessment and there will no longer be a fixed upper capital limit. In exceptional circumstances actual income from capital will be used in the calculation.
The savings credit
16.The savings credit will reward those aged 65 and over who have built up a modest income for retirement. It is intended that claimants will receive a cash addition of 60 pence a week for every pound of pension (such as occupational pensions and SERPS for example) and income from savings they have above the level of the savings credit threshold (expected to be around £77 in 2003). Single pensioners will receive a maximum savings credit that is expected to be around £13.80. For every pound of income a pensioner has above the level of the guarantee credit (expected to be around £100 in 2003), the intention is that the pensioner's savings credit will be reduced by 40 pence.
17.The savings credit threshold for couples in 2003 is expected to be around £123 a week, the level of the guarantee credit is expected to be around £154 a week, and the maximum savings credit is expected to be around £18.60 a week.
18.The Act also introduces measures to ensure that pensioners who receive amounts in respect of their extra costs (i.e. disability or caring) and other amounts (such as housing costs), in addition to the “standard minimum guarantee”, also gain from the savings credit.
19.The chart below shows the impact of Pension Credit.
20.Tables showing how Pension Credit will work are at Annex B, and some examples are at Annex C.
The claims process
21.In the current Income Support system all income, regardless of source, and most personal circumstances have to be reported and there is a continuing obligation to report changes as they occur. The Department's research (DSS Research Report No.100, ‘Overcoming Barriers: Older People and Income Support' - copies are available at http://www.dwp.gov.uk) has shown that these and other requirements create a claims and administration process which, for pensioners, can act as a significant deterrent in claiming entitlement. Various features of Pension Credit should reduce the deterrents.
22.The requirement to report changes in personal circumstances as they occur will be changed for those aged 65 and over. The Act introduces an assessed income period which will normally run for five years. During this time there will be no requirement to report changes in income from any retirement provision that a pensioner has made although benefit upratings and changes in income from private pension will be taken into account as they occur. In the main, only those types of changes that must be notified for basic state pension purposes will need to be reported. These include significant life events and changes in the composition of pensioners' households. When these occur the assessed income period will end and entitlement to Pension Credit will be reassessed. This will include consideration of setting a new assessed income period based on the pensioner's circumstances at that time. The new period will normally run for five years from the date of the new assessment.
23.At the end of the five-year period, a reassessment will be made and any adjustments in income will only take effect from the beginning of the new five-year assessed income period. However, pensioners will be able to have their cases reassessed on request at any time during the five-year assessed income period should their retirement provision decrease. If that results in higher entitlement to Pension Credit, Pension Credit will be paid at the new higher rate.
24.The income assessment for Pension Credit will abolish the current remunerative work (16-hour) rule that applies to MIG claimants. Pensioners will not lose their entitlement simply because of the number of hours they, or their partners, work each week.
25.On 15 March 2000, the Government announced a new pensions organisation within the Department for Work and Pensions, which would manage benefits and services for older people. On 2 April 2001, the Government announced that the new organisation would be called "The Pension Service". The Pension Service began to operate on 1 April 2002 and will manage Pension Credit from October 2003.
The position of those claiming Housing Benefit and Council Tax Benefit
26.Regulations will provide that pensioners who receive the guarantee credit will automatically qualify for maximum Housing Benefit and Council Tax Benefit. Those who receive the savings credit only, or who are not entitled to Pension Credit, will claim Housing Benefit and Council Tax Benefit under new rules which will, in the main, reflect those for Pension Credit. However, the applicable amount in the case of Housing Benefit and Council Tax Benefit for pensioners aged 65 and over will be increased by the maximum savings credit to ensure that they receive the full benefit of any savings credit entitlement. Pensioners with capital exceeding £16,000 who are entitled to the savings credit only or who have no entitlement to Pension Credit will be excluded from Housing Benefit and Council Tax Benefit, as they are under the present rules for MIG.
Pension Credit – legal framework
27.Pension Credit follows the pattern of benefits provided under the Social Security Contributions and Benefits Act 1992 and the Jobseekers Act 1995 and fits within the Social Security Administration Act 1992 and the Social Security Act 1998. In particular:
it will be administered by the Secretary of State for Work and Pensions;
entitlement will be decided by persons acting on behalf of the Secretary of State;
decisions on entitlement and the assessed income period will be subject to appeal to an appeal tribunal and beyond that, on a point of law, to the Social Security Commissioners and the courts.
