Amid the ongoing Brexit furore, other news emanating from the general direction of Westminster has largely been drowned out by the sound of MPs arguing loudly and at length over the shape of Britain’s future relationship with the European Union. Arguably then, it’s a great time for Government departments to discreetly release information on controversial and potentially contentious policy changes.
And so it was that last week, that the Department of Work and Pensions (DWP) quietly let it be known that changes to the benefits system could result in some pensioners losing as much as £7,000 per year.
Credit Where It’s Due
In addition to the state pension, some retired people are entitled to an additional top-up benefit. Officially known as the Pension Credit, the payment is currently available to single people whose weekly income is under £163.00 per week, and to couples who would otherwise be surviving on less than £248. Or to put it another way, the payment is designed to bring the incomes of the poorest pensioners up to a level considered by Government to be the minimum required for a decent life.
The good news for hard-pressed pensioners is that the benefit exists at all. The government estimates that around four million people are entitled to the payment, which can make a huge difference to weekly budgets. But the bad news is twofold. First, around a third of those who could make a claim have not done so and are, therefore, missing out on an additional source of income.
And second, new rules announced last week by Pensions Minister, Guy Opperman will prove costly to a significant minority of people who have just arrived at the state retirement age.
Under changes flagged up by the Department of Work and Pensions, from May 15 of this year new pensioners who are in relationships and whose partners are younger than the state pension age, will not be entitled to the Pension Credit. Instead, they will be offered an alternative and considerably lower benefit under the Universal Credit system.
In practice, this could mean a sharp drop in income from some, with the Universal Credit payment for a couple amounting to just £114.81 a week compared to the Pension Credit for couples of £248.
In a statement to MPs, Guy Opperman justified the change by arguing that the additional payment was intended exclusively to help pensioners and not those who were still officially part of the workforce.
“Pension Credit is designed to provide long-term support for pensioner households who are no longer economically active. It is not designed to support working-age claimants,” he said. “This change will ensure that the same work incentives apply to the younger partner as apply to other people of the same age, and taxpayer support is directed where it is needed most.”
Indicating that this was seen by Government as a matter of principle, rather than an exercise in cost-cutting, Opperman asserted that spending on state pensions had risen £1,450 since 2010 while additional benefits for pensioners currently stood at £121.5bn.
Government Should “Think Again”
But lobby groups representing pensioners were quick to condemn the rule change. Charity, Age UK was one of the first to raise objections.
“Make no mistake, this very bad news for everyone who is affected,” said Director Caroline Abrahams.
“It’s a substantial stealth cut. A couple claiming in the future could receive as much as £140 per week less than an older mixed (age) couple claiming before the change comes in.”
And as Abrahams pointed out, mixed age couples are relatively common.
“It is by no means unusual for one partner to be slightly older than the other within relationships and the bigger the age gap between them, the more long-lasting the adverse impact on them will be because of this proposed change. For some, the impact will be truly devastating. The Government should think again.”
The Universal Credit Trap
Age UK also warned that existing claimants – not just those applying for the Pension Credit after May 15 could also be affected. For example, if a mixed-age couple who are currently receiving the benefit should for some reason lose their eligibility, they will find they are unable to get back onto the Pension Credit after the May deadline. This could happen if one partner travels abroad for four weeks or more to see friends or relatives. This period away would stop the benefit and on return, after May 15 the couple would have to apply for the sum under the Universal Credit system.
Supporters of the change might argue that as a means-tested benefit, Pension Credit should naturally drop away if one of two people in a long-term relationship happens to be of working age, but as Age UK is pointing out, the rule change could have unforeseen social consequences.
For instance, two people in a mixed-age couple might well feel pressured into splitting up to avoid losing money. Likewise, a single pensioner receiving pension credit could lose the right to receive the benefit if he or she begins a relationship with a younger partner.
Claiming Pension Credit
If you are already past the state pension age and in a mixed-age relationship with a younger partner, now is probably the time to apply for Pension Credit.
In order to check your eligibility, the DWP will add up any retirement income that you are also entitled to, including state and workplace pensions. If your weekly income is below the designated minimum for a couple, the state will make up the difference. Although eligibility is based on the state retirement age, you are not required to have paid any national insurance in order to apply.
It’s also important to remember that although the top up can be quite small, the fact that you are receiving Pension Credit opens the door to other benefits. For instance, you will be eligible for cold weather payments of up to £25, you may receive housing benefit (if you’re in rented accommodation) and there is a good chance that you will also be exempt from Council Tax.
It is, in other words, potentially a very significant benefit, both as an aid to making ends meet, weekly and monthly and as a gateway to other benefits.