MONEY COMMENT
More Money For Older People

By Cliff D'Arcy
September 5, 2003

There are close to 22 million households in Britain, with pensioner households accounting for eight million of this total (over 36%). Sadly, thanks to social and financial inequality, many pensioners struggle to survive on low incomes, with many being heavily reliant on state benefits to provide them with an income.

What's more, not only are retirement incomes low, they also increase more slowly than workers' earnings, typically by less than 3% a year. However, there's some good news for retired people with modest incomes and savings: the government is launching the Pension Credit on 6 October. Predictably, there's also some bad news: as with so many means-tested benefits, the Pension Credit is far too complicated!

The government is spending millions on a huge advertising campaign to promote awareness of this benefit, including writing to every pensioner household in the country. It estimates that half of all pensioner households (around four million) are entitled to some help. The average payment is estimated to be around £400 a year and, so far, over two million households have registered for the Pension Credit.

The basic idea is that the Pension Credit replaces the minimum income guarantee for those aged 60 and over. The minimum weekly income level is £102.10 for single pensioners and £155.80 for couples. There's also an additional payment awarded to claimants with modest savings. Until now, prudent pensioners with savings have been penalised when applying for means-tested benefits. Happily, the Pension Credit will give up to an extra £14.79 a week (£19.20 for couples) to pensioners with savings and investments.

However, what's ridiculous and absurd is that the government has arbitrarily assumed that pensioners earn £1 a week for every £500 of savings they have. That equates to an interest rate of 10.4%, which is about three times actual savings rates. Although the first £6,000 of savings is excluded from this means test, I view this inflated interest calculation as scandalous and shameful - grrrr!

If you are between 60 and 65, you are likely to be eligible for Pension Credit if your income is less than £102.10 (£155.80 for couples). For the over-65s, these limits are £139.10 and £203.80 respectively. Here are some official worked examples, guidance charts and answers to questions. If you're retired and suspect you may qualify for Pension Credit, don't delay: call the helpline today on 0800 99 1234.

Alternatively, if you're one of our younger Fools, why not mention the Pension Credit to your older relatives, friends and neighbours, or forward this article to those with e-mail access? It could prove to be of real benefit to them...

More: Age Concern | Citizens Advice | Help The Aged (Tel: 0800 800 6565).