Respected financial authority, Helen Morrissey, highlights the need for retirement income planning, despite the recent 10.1% increase in State Pension payments. She emphasises how the increased benefit, equating to just over £10,600 for the full new State Pension and £8,100 for a full Basic State Pension for the 2023/24 fiscal year, remains below the necessary level for retirement income.
Hargreaves Lansdown pension analysis expert, Morrissey, had voiced her concern over a large numbers of elderly individuals, notably women, who aren’t receiving the full State Pension amount. Such figures are often due to significant gaps in their National Insurance contributions as a result of time taken off for family care.
The Department for Work and Pensions (DWP) estimates that around 850,000 elderly individuals could be missing on Pension Credit. This is a means-tested benefit offering over £3,500 of financial support annually and serves as a gateway to additional help with housing costs, Council Tax, and heating bill.
About 1.4 million pensioners across Great Britain currently receive Pension Credit. Elderly individuals or their friends and family can quickly check eligibility using the Pension Credit calculator featured on the DWP website. They may also contact the Pension Credit helpline for assistance with claiming the benefits.
In addition to the ongoing need for effective retirement income planning, Morrissey states: “Spending tends to fall sharply as we get older as you may go out less and you may not drive as much as you once did.” This trend suggests that additional retirement income sources, such as final salary pension provisions, may play a crucial role for some older adults.
Analysis conducted by Hargreaves Lansdown reveals that only about 42% of households are currently on track to secure a moderate retirement income of approximately £23,000 per year for a single person, which is a figure suggested by the Pensions and Lifetime Savings Association (PLSA).
She adds an outlook on a scenario where one does not have a decent retirement savings reserve: “if you are single, or still paying significant housing costs, you’ll be struggling to meet anything more than your most basic needs.”
Cost of Living Payments Worth £300 and £299
Pensioners who qualify for Pension Credit may also be eligible for cost of living payments due before Spring 2024. There are two such payments, with the current one at £300 available for those who are on income-related benefits, including Pension Credit, till November 19, 2023.
A Pension Credit award, even of a few pence, is adequate to qualify a pensioner for the subsequent means-tested cost of living payments worth £300 and £299. Those who qualify for the Winter Fuel Payment and are born before September 25, 1957, could qualify for the £300 pensioner cost of living payment.
It’s important to note that Pension Credit is a retrospective benefit that can be claimed up to three months late, implying that a claim lodged before December 10 falls within the August 18 to September 17 qualifying period.
Pension Credit Explained
Pension Credit is a benefit that tops up the income of an individual beyond the State Pension age and on a low income. It increases the income of a single pensioner to at least £201.05 per week and for couples to at least £306.85, or more for those who have a disability or caring responsibilities.
Pension Credit recipients can also get other benefits, such as access to Housing Benefit or Support for Mortgage Interest, Council Tax discount, free TV licence (for those aged 75 or over), help with NHS dental treatment, glasses and hospital appointment transport costs, heating cost assistance through the Warm Home Discount Scheme, and discount on the Royal Mail redirection service if moving house.
In May 2019, a legislation change implied that ‘mixed age couples’ — couples with one partner qualifying for State Pension and the other below it — are now considered ‘working age’ when checking for means-tested benefit entitlement.
The Pension Credit calculator on the GOV.UK website can help ascertain your eligibility. You’ll need information about your earnings, benefits, pensions, and savings and investments, as well as details about your partner if applicable.
Note that you cannot use the calculator if you or your partner are deferring your State Pension, own more than one property, are self-employed, or have housing costs not covered either by mortgage repayments or Housing Benefit.
Pension Credit applications can be commenced up to four months before reaching State Pension age. While you can claim any time after you reach State Pension age, your claim can only be backdated for three months, meaning you can get up to three months of Pension Credit in your first payment.
It is crucial to remember Pension Credit and planning for your retirement income needs. You can find more advice on retirement income planning and updates on financial news in Glasgow.
