Why has my Pension Credit gone down?

[Deleted User]

My mum (89) is on pension credit and went for an eye test last week. she was told that due to the reduction in Pension Credit she no longer qualifies for 'free' spectacles (even the cheapo £25 pairs from Specsavers which she ended up buying).

So this is how our OAP population is 'treated' while we can put up economic 'visitors' to this country in hotels - and they still complain.

Pollycat

McKneff wrote: »

Do you get other benefits ie council tax reduction, housing benefit etc

I think if you are entitled to Guarantee Pension Credit you will get council tax reduction and housing benefit (if in rental property).
I would hope the OP is claiming all benefits that he/she is due to.

Gardenut wrote: »

I have just received a letter this morning to say my new rate of Pension Credit from April 11 2016 will be £15.37. I already get £16.70. I am 67 years old and I thought all benefits for pensioners were covered by the triple lock. I have no income apart from my state pension and the pension credit, and struggle to pay my bills at it is. How can they reduce this benefit?

I may be wrong but my understanding that the triple lock related only to state pension (but I'm happy to be corrected).

Pollycat

Sleazy wrote: »

My mum (89) is on pension credit and went for an eye test last week. she was told that due to the reduction in Pension Credit she no longer qualifies for 'free' spectacles (even the cheapo £25 pairs from Specsavers which she ended up buying).

So this is how our OAP population is 'treated' while we can put up economic 'visitors' to this country in hotels - and they still complain.

It's been a while (4+ years) since my Mum was on Guarantee Pension Credit but my understanding was that if you were in receipt of GPC you were entitled to free dental care and eye care - regardless of how small the amount of GPC was.

My Mum certainly had free glasses when she was on GPC.

When you say this:

she was told that due to the reduction in Pension Credit

Do you mean your Mum no longer gets any GPC?
Or that the amount of GPC has decreased?

hugheskevi

It helps to understand the history of Pension Credit to understand the current policy.

Way back just before the year 2000, Labour introduced the Minimum Income Guarantee (the equivalent of Pension Credit today). This was a large increase in the means-tested minimum income pensioners received. This was expected to be a popular measure but meant that unless someone had income above the Minimum Income Guarantee, all their income was withdrawn at 100% - so people who had a little income above the Basic State Pension got no more than those who had no additional income. This led to many complaints.

To address these complaints, Labour introduced the Savings Credit (and the Minimum Income Guarantee was replaced by the Guarantee Credit, which did the same thing as the Minimum Income Guarantee). This reduced the 100% withdrawal taper on income above the Basic State Pension to 40% so that those who had made extra income provision were better off than those who had not. However, as 40% is less than 100% it meant the taper extended to higher incomes whereas previous the means-testing had stopped once an individual's income reached the level of the Guarantee Credit (although due to other means-tested benefits and premia within Pension Credit it was still quite likely the individual would be means-tested).

The maximum amount of Saving Credit occurred if someone had income exactly equal to the Guarantee Credit. In that case, they got 60% of the difference between the level of the Guarantee Credit and Basic State Pension.

But Basic State Pension back then increased by RPI, and the Guarantee Credit by earnings (as earnings growth is usually higher than RPI, at least back then it was). So over time the amount of Savings Credit payable expanded, and in particular the level of income at which an individual was eligible for Savings Credit (which was far in excess of the Guarantee Credit level) increased even faster than earnings growth. This meant an increasing proportion of pensioners became subject to means-testing over time.

So rather than start the 40% taper at the level of the Basic State Pension, the start point was de-linked, and the starting point increased by earnings instead. That stopped the growth of Saving Credit over time.

But then prices started increasing faster than earnings after 2008. It was considered unacceptable to increase Basic State Pension by more than the Guarantee Credit, as then the lowest income pensioners would get a lower increase, so Guarantee Credit was increased by prices as well. This cost extra money, which was found by increasing the start point of the 40% taper by an even higher rate, thus reducing the size of the maximum Saving Credit.

Policy for April 2016 uprating is that the Guarantee Credit and Basic State Pension increase by 2.9%, and that the overall Pension Credit (Guarantee Credit and Saving Credit combined) will be frozen in cash terms where recipients of Saving Credit have an unchanged income. This is again achieved by increasing the starting level of income at which individuals are eligible for Saving Credit by more than prices and earnings. As income will not be unchanged (not least due to the State Pension uprating) the effect is that awards of Pension Credit will reduce. This continues the policy in recent years of reducing Saving Credit eligibility.

Isn't there something to the effect 'what the government says you need to live on'?

The Guarantee Credit.

If the PC rate doesn't go up, anyone relying it has to cope with a year-on-year reduction in their income.

Total income does not go down, it just doesn't go up as fast as the increase in Basic State Pension, as the increases are means-tested. Also, the Guarantee Credit component of Pension Credit has gone up, it is the Saving Credit component which has gone down - so the minimum level anyone has to live on (Guarantee Credit) has increased by the same percentage as Basic State Pension.

Do the Government increase the 'amount you should have to live on' year on year?

The Guarantee Credit increases by earnings (or policy has been by prices, if price growth is higher than earnings). Other aspects of the system mean that those who have income above the Saving Credit eligibility point (£126.50 for a single person in 2015/16) will get less than this increase due to means-testing.

It does seem unfair to me that they should give you more money with one hand and take it away with the other.

This is part of the rationale for single-tier pension (although single-tier doesn't do much to reduce means-testing overall - housing benefit, council tax benefit, etc, but it does significantly reduce Pension Credit eligibility over time).

I may be wrong but my understanding that the triple lock related only to state pension (but I'm happy to be corrected).

It only relates to the Basic State Pension, not all State Pension.

However, recent policy has been to also ensure the rate of Guarantee Credit increases by the higher of earnings growth or the cash increase of the Basic State Pension, so the Triple Lock has (sort of) been extended to the Guarantee Credit.



I'd like to say that it isn't as complicated as it sounds...but unfortunately, it is

xylophone

http://paullewismoney.blogspot.co.uk/2015/10/the-uprating-of-benefits-april-2016.html

The Age Concern booklet with explanations of calculations for the current year.

http://www.ageuk.org.uk/Documents/EN-GB/Factsheets/FS48_Pension_Credit_fcs.pdf?dtrk=true

https://www.gov.uk/government/publications/pension-credit-toolkit/pension-credit-toolkit-advice-and-guidance-for-stakeholders

margaretclare

Thank you very much for the lengthy explanation!

Many of these changes have escaped me, as DH and I have never been on the means-tested parts of pension payments.

It's useful to know, however.

mark5

The lesson here though is to save for retirement and not have to struggle to make ends meet.

bigfreddiel

Gardenut wrote: »

Thank you for your replies. That really doesn't seem fair when my state pension/pension credit is my only income. I'll be giving them a ring on Monday to find out.

I guess the fact your only income is from the state is down to yourself. Did no one advise you to start your own pension when you were working?

I teach apprentices and I always yell them to start a pension of their own, even if they only pay in £20 or £30/ month. Something I wish I haft been told when I was18!
Cheers fj

Gardenut

Thank you so much Hugheskevi for such a comprehensive explanation. I haven't got my head round it all yet but I will. Yes, I receive Council Tax Benefit but I still have my mortgage to pay (albeit interest only). I know I have to make the best of what I get and I can't change it so I just have to get on with it I suppose. Thanks again to everyone.

Gardenut

P.S. I've never earned enough to be able to pay for a personal pension. When I was 50 a pension advisor came to my place of work but because of my age he advised me that there would not be enough time to accumulate enough for a pension. As it turned out I worked till I was 67 so things may have been different if I had not taken his advice.