Part of the Department for Work and Pensions. April a guide to. Pension Credit

Transcription

1 Part of the Department for Work and Pensions April 2005 a guide to Pension Credit

2 About The Pension Service The Pension Service is part of the Department for Work and Pensions. It is responsible for all the Department s pensions-related business for today s and future pensioners. The Pension Service has been set up to provide a service tailored to your needs, whether you are already a pensioner or are planning for your retirement. This improved service has a network of pension centres across England, Scotland and Wales making best use of technology to deal with your queries accurately and efficiently. Pension centres are backed up by local services, operating in the community, delivered in partnership with local authorities and voluntary sector organisations. 2

3 About this guide This guide is intended for professional and voluntary advisers, but may also be useful for other people who want to know more about Pension Credit. This guide has no status in law. It does not cover every situation, nor does it provide a full interpretation of the Pension Credit rules. It should not be treated as a complete and authoritative statement of the law. Information about social security benefits in general can be obtained from The Pension Service, on the Department for Work and Pensions (DWP) website ( and in leaflet MG1 A guide to benefits. The leaflets mentioned in this guide are also on the website. Pages 96 to 97 list these leaflets, and tell you how you can get copies of them. For more information contact your social security office, Jobcentre or Jobcentre Plus office. The basis of the law for Pension Credit is the State Pension Credit Act 2002, the Social Security Administration Act 1992 and the Social Security Act The Acts provide the framework for the detailed rules contained in Regulations made by the Secretary of State and approved by Parliament. Pages 98 to 100 list all the relevant legislation and supporting guidance and tell you where to find them. We give references to the relevant legislation throughout the guide in case you want to consult it. The abbreviations used are explained on page 100. This guide went to press in February Changes to the law after that date may affect some of the rules explained here. In particular, the Civil Partnership Act is expected to come into force before the next edition of the guide is published in This will change the way we treat same-sex couples. There is some more information about this at page 10. 3

4 About this guide Great Britain and the United Kingdom This guide is about Pension Credit in Great Britain, that is, England, Scotland and Wales. Northern Ireland has similar arrangements under separate legislation but the rules may be different. You can get information on Pension Credit in Northern Ireland from social security offices in Northern Ireland. The term United Kingdom is also used in places in this guide. The United Kingdom (UK) covers England, Scotland, Wales and Northern Ireland. The Channel Islands and the Isle of Man are not part of the UK. 4

5 Contents About The Pension Service 2 About this guide 3 Great Britain and the United Kingdom 4 Introduction 9 How to use this guide 9 What is Pension Credit? 9 Pension Credit for couples 10 What about children? 11 Income and capital 11 Pension Credit amounts 11 Who can get Pension Credit? 11 Members of religious orders 12 How will Pension Credit help you? 13 The guarantee credit 13 Your appropriate amount 13 The standard amount 14 The extra amount for severe disability 14 The extra amount for carers 15 The extra amount for housing costs 16 Who can get help with housing costs? 16 Housing costs explained 17 High housing costs 21 Non-dependants and housing costs 22 Special housing situations 23 The transitional extra amount 24 The savings credit 25 How do we work out your income? 26 Working out your income for guarantee credit 26 What counts as income? 26 How we work out your earnings 28 Disregards 30 Working out your income for savings credit 34 Working out your capital 34 Notional capital 35 Disregarded capital 36 How we work out your capital assets 40 5

6 Contents How do we work out Pension Credit? 44 The guarantee credit calculation 44 The savings credit calculation 44 Examples 45 How do you apply for Pension Credit? 48 Applying by phone 48 Applying by post 49 When you can apply 50 What happens after you apply? 51 Who decides if you get Pension Credit? 51 How will you be told? 51 What to do if you think our decision is wrong 52 How to appeal 52 About payment 53 Paydays 53 First payment 53 Small amounts of Pension Credit 53 If you are getting another social security benefit 53 How Pension Credit is paid to you 54 Deductions from Pension Credit and payments to third parties 57 Mortgage interest payments 58 Other deductions 58 What happens if your circumstances change? 59 How to tell us about changes 59 The changes we need to know about 60 Earning money 60 Changes to do with other money coming in 61 Changes to do with your capital 61 Changes to do with your home 61 Going into and coming out of hospital 62 Leaving GB 62 Changes to do with your family 62 If someone dies 63 What is an assessed income period? 64 Changes to pensions and annuity income during an assessed income period 64 Changes to capital during an assessed income period 65 The end of the assessed income period 65 6

7 Contents People in special situations 67 If you have recently come to GB (including returning British Citizens) 67 General rules 67 If you have come on a temporary basis 68 The right to reside and habitual residence tests 68 Right to reside 68 Habitual residence 69 Interviews 70 Sponsored immigrants 71 People from abroad who can get Pension Credit for a short time 71 If you are going away from Great Britain temporarily 72 If you leave Great Britain but your partner stays in Great Britain 72 If your partner leaves Great Britain but you stay in Great Britain 73 If you go into hospital 73 Linked periods in hospital 74 How going into hospital affects your guarantee credit 74 Housing costs while in hospital 76 How going into hospital affects your savings credit 76 If you live in a care home 77 What do we mean by a care home? 77 How living in a care home affects your Pension Credit 77 More information on moving into a care home 78 If you are a prisoner 78 What do we mean by prisoner? 78 What if you have a partner? 79 What if you are on remand? 79 What about prisoners on leave? 79 What about Intermittent Custody? 79 Can you get other help? 80 If you are homeless 80 If you are unmarried but living together as husband and wife 80 Who decides if you are living together? 81 If you and your partner are living apart temporarily 82 If you are in a polygamous marriage 83 What if you are overpaid Pension Credit or other benefits? 84 How do overpayments happen? 84 What if you disagree? 85 How is the money recovered? 85 7

8 8 Contents Other social security benefits and further help 86 Social security benefits from local authorities 86 Housing Benefit and Council Tax Benefit 86 The Social Fund 87 Cold Weather Payments 87 Funeral Payments 88 Community Care Grants 88 Budgeting Loans and Crisis Loans 88 Sure Start Maternity Grants 89 Winter Fuel Payments 89 Age-related payment Interim payments 90 Other social security benefits 91 Attendance Allowance 91 Disability Living Allowance 92 Carer s Allowance 92 Incapacity Benefit 93 Jobseeker s Allowance 93 Further help 94 Help with National Health Service (NHS) charges 94 Help with the cost of prison visits 94 Help if you or your partner are working 95 Help if you care for a child or children 95 Further information 96 Social security guides and leaflets and where to get them 96 Guides 96 Other leaflets 96 Where to get them 97 Advice for people with disabilities 98 Detailed information 98 The legislation: Acts and Regulations 98 Where to get copies of the Acts and Regulations 99 The blue volumes 99 The Decision Maker s Guide 99 The Social Security Commissioners 99 The Acts and Regulations referred to in this guide 100 Acts 100 Regulations 100 Index 101

9 Introduction How to use this guide This guide covers most things you should need to know about Pension Credit. We hope it will explain this entitlement and answer some key questions: What is Pension Credit? Who can get it? How is it worked out? How do you apply for it? What happens after you apply? This guide is long and may look complicated at first, because we have to cover so many different circumstances. The contents page should help you find your way around and see which sections answer your questions. Once you have read the early sections and feel clear about the basics, you can explore further and find out about more specific queries. For example: Will you still get Pension Credit if you go abroad? How will moving into a care home affect your Pension Credit? Can you get Pension Credit if you come to Great Britain from abroad? If you cannot see what you want on the contents page, there is a detailed index at the back to point you in the right direction. The abbreviations used in the margins are explained at page 100. What is Pension Credit? Pension Credit, introduced on 6 October 2003, is a tax-free entitlement for people aged 60 and over living in Great Britain. It is paid for out of taxation: you do not need to have paid National Insurance contributions to be eligible. If you are eligible for Pension Credit it is your right to apply for and get it. There are two parts to Pension Credit: the guarantee credit and the savings credit. 9

10 Introduction The guarantee credit provides financial help for people aged 60 or over 1 whose income is below a certain level set by the law. The level that applies to you depends on your circumstances and is called your appropriate amount. 2 How much guarantee credit you get will depend on other money you have, such as other pensions and your savings. Your guarantee credit payment will bridge the gap between the money you already have coming in and your appropriate amount. The savings credit is an extra amount for people aged 65 or over who have made some provision for their retirement (such as savings or a second pension) which brings their income above a level set by Parliament, called the savings credit starting point. 3 You can get a savings credit on top of a guarantee credit. You may still get a savings credit even if your income is above your appropriate amount. Pension Credit for couples Note. These rules will change when the Civil Partnership Act comes into force. When that happens, people of the same sex who have registered as civil partners will be treated in the same way as a married couple. Same sex couples who are living together as civil partners (but who have not registered) will be treated in the same way as an unmarried couple. We will treat you as a couple if you live with your husband or wife or if you live with someone as husband and wife. The other person is called your partner. The guidelines for deciding whether two unmarried people are treated as a couple are explained on pages 80 to 82. In some cases you will be treated as a couple if you are temporarily separated from your partner (see page 82). If you are treated as a couple you will have a joint appropriate amount and your income and capital will be added together when we work out your Pension Credit. If both you and your partner are aged 60 or over, either of you can apply for Pension Credit. Only one partner can get Pension Credit at any one time. If you cannot agree which of you will apply, we can decide for you. 1 From 2010, the age from which people can get Pension Credit will change in line with the change to women s State Pension age. 2 This is called the appropriate minimum guarantee in the legislation. 3 This is called the savings credit threshold in the legislation. 10

11 Introduction Two people of the same sex who are living together are not treated as a couple. If you are living with someone of the same sex, you will be treated as a single person. What about children? Pension Credit does not include any money for children. If you have a dependent child living with you, please see page 95 for other help you may be able to get. Income and capital If you or your partner have a pension of any kind, it will normally be taken into account when your Pension Credit is worked out. Certain other types of income are also taken into account but some can be ignored, either in full or up to a certain amount. Pages 26 to 34 explain these rules and how different types of income are treated. If you (or you and your partner if you are in a couple) have capital which, in total, comes to 6,000 4 or less, we will ignore it. There is no set limit to the amount of capital a person may have, but if it comes to over 6,000 4 it may affect how much Pension Credit you can get. Some types of capital assets, such as your home and your personal possessions, are usually ignored. Pages 34 to 43 explain these rules and how capital is worked out. Pension Credit amounts The amounts given in this guide are those that apply from April Amounts are normally increased in April each year and a list of current rates is given in leaflet GL23 Social security benefit rates. SPCA s1 Who can get Pension Credit? There are two main rules about who can get Pension Credit: your age; and where you live. 4 10,000 if you live in a care home. 11

12 Introduction You can only get Pension Credit if you are aged 60 or over. 5 If you are under 60 but your partner is over 60, he or she can apply for Pension Credit. You can only get Pension Credit if you live in Great Britain (GB) and you: have the right to reside, and are habitually resident, in the United Kingdom (UK), the Channel Islands, the Isle of Man or the Republic of Ireland; or are treated as having the right to reside, and as habitually resident, in the UK. The habitual residence and right to reside rules are explained on pages 68 to 70. If you have come to GB from abroad you may be able to get Pension Credit, but this depends on your residence or immigration status and on your circumstances (see pages 67 to 71). In some cases, you may be able to keep Pension Credit if you leave this country temporarily (see pages 72 to 73). SPCR 6 & 7 Members of religious orders Members of religious orders who have given up their personal possessions and whose needs are met by the order cannot get Pension Credit. In some cases a member whose needs are not fully met by the order (for example, one living outside the order s premises to nurse a sick relative, or an elderly or frail member no longer able to participate fully in the order s activities) may be able to get Pension Credit From 2010, the age from which people can get Pension Credit will change in line with the change to women s State Pension age.

13 How will Pension Credit help you? Each part of Pension Credit the guarantee credit and the savings credit is worked out separately. Some people will get both; others could get either one. Which you get and the amount paid to you depends on your age and income, as explained on pages 9 to 11. This part of the guide explains how they are made up and how we work out your entitlement. We discuss the guarantee credit below and the savings credit on page 25. The next part of the guide How do we work out your income? shows how we calculate your income (including income from capital) and explains how this affects the amount of Pension Credit you get. At the end of the next part we include some examples (pages 45 to 47) to show how Pension Credit works in different ways for different people. SPCA s2 The guarantee credit The guarantee credit is the difference between your appropriate amount and your income, which may include a deemed income from your capital (see page 35 for an explanation of deemed income). This part of the guide explains how your appropriate amount and your income are worked out. Your appropriate amount Your appropriate amount 6 will be made up of: the standard amount 7 this is the minimum amount of money the Government says you need for your normal expenses and those of your partner, if you have one. It may also include some or all of the following extra amounts: 8 extra amount for severe disability; extra amount for carers; 6 This is called the appropriate minimum guarantee in the legislation. 7 This is called the standard minimum guarantee in the legislation. 8 These are called additional amounts in the legislation. 13

14 How will Pension Credit help you? extra amount for housing costs to cover certain accommodation costs that are not met by Housing Benefit; and transitional extra amount for some people who were getting Income Support or Jobseeker s Allowance before they started to get Pension Credit. In total, this sum is called your appropriate amount. If you are not entitled to any of the extra amounts, your appropriate amount will be the same as the standard amount. The amount of Pension Credit you can get will depend on other factors, such as your income and capital. The standard amount SPCA s2(4) & The standard amount is the minimum amount of money the (5) & SPCR 6 Government says you need for your normal day-to-day living, including such household costs as water or fuel charges. There are two rates of standard amount: a week for single people; and a week for couples. SPCA s2(7) & SPCR 6 & sch I part I Extra amounts can be added to the standard amount. The four extra amounts are described in the next sections. The extra amount for severe disability There are two rates for severe disability. The higher rate is twice the lower rate. If you are single you may get the lower rate ( a week) if: you live alone; 9 and you get Attendance Allowance or the middle or highest rate of the care component of Disability Living Allowance; and no-one gets Carer s Allowance for looking after you In certain circumstances you can still get the extra amount for severe disability even if there is someone living with you; for example, if that person is under 18 or blind or a boarder.

15 How will Pension Credit help you? If you have a partner you may get the higher rate ( a week) if: you and your partner both get Attendance Allowance or the middle or highest rate of the care component of Disability Living Allowance; and no-one else lives with you; 9 and no-one gets Carer s Allowance for looking after either of you. If you have a partner you may get the lower rate ( a week) if: SPCR 6 & sch I part II no-one else lives with you; 9 and either you both get Attendance Allowance or the middle or highest rate of the care component of Disability Living Allowance, and someone gets Carer s Allowance for looking after you or your partner (but not both of you); or one of you gets Attendance Allowance, or the middle or highest rate of the care component of Disability Living Allowance, and the other is blind and no-one gets Carer s Allowance for looking after either of you. The extra amount for carers You may be able to get this extra amount ( a week) if: you or your partner are getting Carer s Allowance; or you or your partner have claimed Carer s Allowance, and would be getting it if the person who claimed did not already have another higher benefit. (We call this underlying entitlement.) If each partner satisfies either one of these conditions, the extra amount is doubled. The extra amount is paid for eight weeks after Carer s Allowance (or underlying entitlement to it) stops unless the Carer s Allowance has already continued for eight weeks after the person being cared for has died. 9 In certain circumstances you can still get the extra amount for severe disability even if there is someone living with you; for example, if that person is under 18 or blind or a boarder. 15

16 How will Pension Credit help you? SPCR sch II paras 11,12 and 13 The extra amount for housing costs The extra amount for housing costs is for those costs not covered by either: Housing Benefit payments from your local council to help with your rent or towards the cost of living in a hotel, guest house, hostel or somewhere similar (see pages 86 to 87); or Council Tax Benefit payments from your local council to help with Council Tax (see pages 86 to 87). The housing costs that can be covered by extra amounts in Pension Credit are: mortgage interest payments; interest on loans for essential repairs and improvements; hire purchase interest payments when you are buying your home by hire purchase; ground rents; feu duty (in Scotland); some service charges; co-ownership and Crown tenancy charges; charges for tents and site rents; and rentcharge payments. These costs are explained on the following pages. Other costs such as water charges, some repairs and insurance costs, and cesspit and septic tank emptying are treated as covered by the standard amount. Para 3 In Scotland the rent for a croft is covered by the Housing Benefit scheme. Who can get help with housing costs? You will be able to get an extra amount for these housing costs if you or your partner are liable to pay these costs to live in your home; or 16

17 How will Pension Credit help you? someone else is normally liable to pay these costs (usually a former partner) but because they are no longer paying them you or your partner now have to. Any non-dependants living in your home will be expected to contribute towards some of these costs themselves, so your benefit may be affected if you have non-dependants (see page 22). You can normally only get these payments for one home, but there are some exceptions. SPCR sch II para 11 If you are temporarily absent from your usual home you may still be able to get an extra amount for housing costs (see page 23). Housing costs explained Mortgage interest If you have a mortgage or loan taken out to buy your home, the extra amount will include help with the interest payments. Pension Credit will not help with repayments of capital or with the premiums on any endowment or pension policy linked to the loan. Pension Credit can only help with the interest on: loans for acquiring an interest in a home ; loans for financing essential repairs or improvements; and loans taken out to repay loans that were used for either of the above. Where a mortgage is taken out partly for another purpose, such as buying a car or as a business loan, the extra amount will include interest only on the part of the loan used to buy or repair your home. A replacement mortgage will only be met to the same level as the original mortgage. For example, if you used the new mortgage or loan partly to clear debts or to replace another loan which was not previously met, the extra amount would not include interest on that part of the new mortgage or loan. See leaflet INF8(PC) Home owners help with housing costs for more information. 17

18 How will Pension Credit help you? Restrictions SPCR sch II para 8 Para 5 If the outstanding capital on your loan, or loans, is more than 100,000 then only the interest on 100,000 can be included in the extra amount. 10 This limit does not apply if the loan was taken out and used, in full or part, to adapt your home for the special needs of a disabled person. 11 The help you can get with interest payments may be restricted if you take out a new loan while you are getting Pension Credit (for example, if you move home). Generally you will get no more help with housing costs than you were getting before you took out the new loan. If you are getting Pension Credit and Housing Benefit and you take out a new loan to buy a home (either the property you were formerly renting or a different property), the amount of help you can get with your new housing costs will be no more than the amount of Housing Benefit you were getting when you were renting. However, the amount you get could be increased later (for example, if interest rates go up). These rules may also affect you if you apply for Pension Credit after you take out the new loan, but you say you want Pension Credit to start from a date before you took out the loan. These rules may not affect you if the loan was for essential repairs and improvements to your new home or if you moved: to meet the special needs of a disabled person; or to provide separate sleeping accommodation for children of different sexes who are aged ten or over A special rule applies if you had been getting interest on a higher loan under a transitional arrangement in Income Support or income-based Jobseeker s Allowance immediately before you started to get Pension Credit. Interest on the higher loan will continue until the next annual check of your housing costs. From then, the normal rules described in this part of the guide will apply to your loan, but you may get a transitional extra amount (see page 24). 11 For the purposes of this rule a disabled person is someone who is over 75 or blind or who gets Attendance Allowance, Disability Living Allowance, long-term Incapacity Benefit or certain other disability-related payments.

19 How will Pension Credit help you? The standard interest rate SPCR sch II para 9 Para 12 We use a standard interest rate to calculate the amount of interest that can be included in the extra amount for housing costs. The standard interest rate is 1.58% above Bank of England base rate. Interest on loans for essential repairs and improvements The extra amount for housing costs can include help with the interest on loans that were taken out and used for the following repairs and improvements, when the work was needed to make your home fit for human habitation: buying and plumbing in a fixed bath, shower, wash basin, sink or lavatory, including providing hot water not connected to a central heating system; repairs to an existing heating system; damp-proofing; providing ventilation and natural lighting; providing drainage facilities; providing facilities to prepare and cook food; providing insulation; providing electric lighting and sockets; providing storage for fuel or refuse; repairs to unsafe structural defects; adapting your home for the special needs of a disabled person; and providing separate sleeping accommodation for children of different sexes aged 10 or over for whom you are getting Child Benefit. 19

20 How will Pension Credit help you? Pension Credit cannot help with home loans not covered by this list. The amount of help will be worked out in the same way as help with mortgage interest. Hire purchase interest If you are buying your home by hire purchase, the extra amount will include help with the interest payments. This will be worked out in the same way as with mortgage interest. Ground rents SPCR sch II para 13 Para 13 The extra amount may include ground rent or other rent where the payment is for a long tenancy. But we will make deductions for fuel and any other service charges included in the payment that cannot be included in the extra amount for housing costs. Service charges The extra amount may include service charges that cover such essentials as management fees, insurance, minor repairs and the cleaning of communal areas. However, the following types of charge cannot be included: charges met by your local authority under the Supporting People scheme; charges for day-to-day living expenses such as meals and laundry, heating, lighting or hot water; and charges to cover major repairs and improvements. If you take out a loan to meet the cost of essential repairs and improvements, the extra amount can also include the interest on that loan. Co-ownership and Crown tenancy charges Para 13 If you are a co-owner and pay a charge to cover rent, mortgage, repairs and other costs to your Co-ownership Housing Society, or if you are a Crown tenant who cannot get Housing Benefit to help with your rent payments, the extra amount will include these charges. But we will make deductions for any fuel or other service charges included in the main charge that cannot be included in the extra amount for housing costs. 20

21 How will Pension Credit help you? Charges for tents and site rents SPCR sch II para 13 Para 13 Para 10 If you live in a tent, the extra amount will include an amount to cover the charges on the tent and the site on which it stands. But we will make deductions for any service charges, as in the paragraph above. Rentcharge Rentcharges are paid by some freeholders under the terms on which they own their own freehold. They can be included in the extra amount if they are covered in section 1 of the Rentcharges Act High housing costs We may decide your housing costs are too high if: your home is larger than is needed for the people living in it; or your home is located in an unnecessarily expensive neighbourhood; or your housing costs, such as mortgage interest, are higher than the cost of other suitable accommodation in the neighbourhood. When we decide whether your housing costs are too high, we look at the following factors: suitable accommodation and housing costs in the area; the circumstances of everyone living in your home, including their ages and state of health, and the effect of a change of home on the education of anyone under 19; and whether you were able to meet the costs of your home when you moved in. If so, your costs cannot be ruled too high for the first six months after you start getting Pension Credit, and possibly not for the next six months. If, on this basis, we decide it is not reasonable for you to seek cheaper accommodation, you will not be affected by these rules. But if your housing costs are considered too high, the amount of money you get could be reduced. 21

22 How will Pension Credit help you? SPCR sch II paras 1(4) & 14 Non-dependants and housing costs We may reduce your extra amount for housing costs if other people, called non-dependants, normally live with you. However, even if you have other people living with you, we will not reduce your extra amount for housing costs if you or your partner are: blind; or getting Attendance Allowance; or getting the care component of Disability Living Allowance. No deduction will be made for any of the following people who share your home: your partner; if you are polygamously married (see page 83), any partner; any person aged under 18; any school-age children for whom you get Child Benefit; a person with whom you jointly rent or own your own home; a tenant, subtenant, or lodger; a carer engaged by a charitable or voluntary body who stays with you to look after you; a person getting a Youth Training allowance; a full-time student (however, a deduction may be made for any time that the student is in full-time work during the summer vacation unless you, or your partner, are aged 65 or over); a person whose home is normally elsewhere; a person who is getting Pension Credit; a person under 25 who is getting Income Support or income-based Jobseeker s Allowance; a person who normally shares your home but is in prison; and a person who normally shares your home but who has been in hospital for 52 weeks or more. In other cases we will make a non-dependant deduction.the amount of the deduction will depend on the number and age of the non-dependants living with you and, in some cases, on their income. 22

23 How will Pension Credit help you? SPCR sch II para 4 Para 4 Special housing situations Absence from your home Provided you intend to return to your home, and have not let it to someone else, the extra amount for housing costs can still be paid if you are temporarily away from your home (for no more than 13 weeks) and are still responsible for these costs. If you know from the start that you will be away for longer than 13 weeks, then the extra amount will be stopped immediately. In some special situations the extra amount for housing costs may continue if you are away temporarily for up to 52 weeks (for example, if you are in hospital or in a care home on a temporary basis). Rent in advance The Pension Credit scheme cannot help if you have to pay rent in advance to get a tenancy, but you may be able to get some help from the Social Fund. There is more information about the Social Fund on pages 87 to 90. More than one home Normally, an extra amount can only include housing costs for one home. But you may be able to get help with another home if you have costs for two because: you are waiting to move into a new home or have moved into a new home and are unavoidably responsible for housing costs on your old and new home (you can only get money on both for up to four weeks); or you have had to leave your home because of domestic violence; or one partner of a couple has to live away from home to study or train. 23

24 How will Pension Credit help you? Homes and businesses SPCR sch II para 6 SPCR 6 & sch I part III If your home includes premises rated as a business, we can help with housing costs only for the domestic part. For example, shop premises with a flat above might be rated as a business, in which case you will only get help from Pension Credit for the flat. The transitional extra amount If you were getting Income Support 12 or income-based Jobseeker s Allowance immediately before you started to get Pension Credit, and were getting some form of transitional protection because of a previous change in the rules, your appropriate amount may include a transitional extra amount. This is to make sure that you do not lose money as a result of the change. The transitional extra amount is the difference (if any) between: the final Income Support or income-based Jobseeker s Allowance applicable amount (the amount before your income was taken off); less any amounts which were included in your applicable amount for children or, if you were in a care home, Residential Allowance; plus any transitional additions; and the standard amount; plus any extra amounts for severe disability, carers or housing costs. The transitional extra amount will go down when other parts of your appropriate amount increase or if you start to get another extra amount. 12 Before 6 October 2003, Income Support could be paid to people over 60 and was also known as MIG (Minimum Income Guarantee). 24

25 How will Pension Credit help you? There is one exception to this rule: If the increase happens because you (or your partner) come out of hospital, the transitional extra amount will not go down. If you stop getting Pension Credit for less than eight weeks, and had been getting a transitional extra amount immediately before, it may be included in your appropriate amount when you re-apply. SPCA s3 & SPCR 7 The savings credit The savings credit is extra money for people aged 65 or over (or whose partner is aged 65 or over) whose qualifying income is above the savings credit starting point. (Qualifying income is explained in the next part of the guide. See page 34.) The savings credit starting point for a single person is For a couple it is Prisoners and members of religious orders who are fully maintained by their order are not entitled to a savings credit. 25

26 How do we work out your income? SPCA s15 & SPCR 15 Working out your income for guarantee credit The Pension Credit calculation uses the income you already have to work out your guarantee credit. This section explains what counts as income and how it is calculated. We also work out your capital, which includes investments, some lump-sum payments and the value of any property and land that you own but do not live on. Capital and how we work out the income you get from it is covered in detail on pages 34 to 43. What counts as income? For working out Pension Credit, your income means the money you (and your partner) have coming in from: State Pension; an occupational or private pension scheme; a retirement annuity contract; Civil List pensions; annuities; most social security benefits, including industrial injury benefits (see page 30 for a list of the benefits that do not count as income) and similar foreign benefits; War Disablement, War Widow s or War Widower s Pensions (or foreign equivalents) and Overage Infirm Allowances; Guaranteed Income Payments (and payments to adults for whom a Child Payment had been paid) from the Armed Forces Compensation Scheme; pensions paid by the German or Austrian government to victims of Nazi persecution; maintenance from a spouse or former spouse; payments under the Workmen s Compensation Scheme; earnings; 26

27 How do we work out your income? Working Tax Credit; payments from lodgers, boarders or people renting part of your home (subtenants); regular payments from an equity release scheme; royalties or public lending rights payments; and regular payments from trust funds. If you have capital of over 6,000 ( 10,000 if you live permanently in a care home), your income may also include a deemed income from this capital. (Deemed income is explained in more detail on page 35.) If you have money coming in which is not on this list for example, regular payments from a charity or relative, payments from your local authority social services for personal care, cash in lieu of concessionary coal it will not be treated as income and so will not affect your Pension Credit entitlement. Payments which are made instead of a particular type of income such as compensation for the non-payment of a particular benefit are normally treated in the same way as payments of that income would be. Money you get on behalf of someone else (other than your partner) is not treated as your income. SPCR 24 If a type of income listed above is paid to a third party (such as a shop or supplier or a relative) on your behalf, it is treated as your income. (This does not apply if you are bankrupt and payments from your occupational or personal pension have to be paid to your creditors or trustee in bankruptcy and you and your partner have no other income.) Some types of income listed above are either completely ignored when we calculate your Pension Credit or partially ignored (these are called the disregards). The different types of disregards are explained on pages 30 to 34. The rest of your income is counted in full when we work out your Pension Credit. The treatment of income is explained below. 27

28 How do we work out your income? Income which is not paid weekly SPCR 17 Income is worked out on a weekly basis. Income that is paid to you in another way (such as a monthly pension) is broken down into equal weekly amounts. That amount (less any disregards) will be used when we calculate your weekly Pension Credit. If the income was for an unspecified period, or was a payment of royalties or Public Lending Rights, it will be treated as being for one year and then divided into weekly amounts for our calculation. If you have a partner SPCA s5 Your income and your partner s income are normally added together for Pension Credit purposes (see page 82 for situations where partners can be treated separately). Notional income SPCR 18 Notional income is income you do not actually get, but are treated as getting. We may treat you as having notional income in the following situations: you have not claimed State Pension but would be entitled to it if you claimed it; you have not taken income available to you under a personal pension plan or a retirement annuity contract; you have deferred payments from an occupational pension; you have given up your rights to an income (for example, income from a trust fund) because you wanted to get Pension Credit, or get more Pension Credit. The notional income will be treated in the same way as income you actually get. How we work out your earnings If you work for an employer SPCR 17A If you or your partner are working for an employer, your gross earnings are all your wages and other payments from that employment, including bonuses, commissions, fees, retainers, sick pay and attendance allowances. 28

29 How do we work out your income? Payments in kind (for example, cigarettes and groceries) do not count as earnings, but non-cash vouchers do count if National Insurance (NI) contributions have been paid on their value. For example, if your partner has to pay NI contributions and their employer gives them supermarket or chainstore gift tokens as part of their pay, the value of those vouchers would count as part of their gross earnings for both NI and Pension Credit. We deduct any tax, NI contributions and half of any contributions towards an occupational or personal pension scheme from gross earnings and what is left counts as earnings in our calculation. If you are self-employed SPCR 17B & CER If you or your partner are self-employed, your earnings are the net profit from that employment. This profit is normally calculated over the previous year, but another period may be used if this will be more accurate. The following expenses are deducted from gross income to calculate net profit: necessary expenses for the business, such as money spent on repairing equipment, interest on a business loan and excess VAT paid while you are getting Pension Credit (this does not cover capital expenditure, depreciation, money for business expansion and business entertainment); repayment of capital on loans for replacement and repair of business equipment, but not on any other loans; Income Tax and National Insurance (Class 2 and Class 4) contributions, if payable (these are calculated on a notional basis); and half of all premiums paid for a personal pension. We can be flexible in how we use these rules to get the most accurate figure for your income. If you are a childminder SPCR 17B & CER 13 If you are working as a childminder in your own home, two-thirds of your gross income is treated as expenses and is ignored completely. The other third counts as earnings. 29

30 How do we work out your income? Disregards Disregards are the part of your income that we do not count when we work out your Pension Credit. Just as your income is calculated on a weekly basis, disregards also apply weekly. Social Security benefits SPCR 15(1) We ignore the following social security benefits when we work out your Pension Credit: Housing Benefit. Council Tax Benefit. Attendance Allowance. Disability Living Allowance. Christmas Bonus. Bereavement Payment. The following additions to industrial injury benefits: Constant Attendance Allowance; Mobility Supplement; and Exceptionally Severe Disablement Allowance. Any Social Fund payment (including Winter Fuel and Cold Weather Payments). Child Benefit. Guardian s Allowance. Child s Special Allowance. Dependency increases for anyone other than you or your partner. Foreign benefits similar to those listed above. Other income which is fully disregarded SPCR sch IV We ignore other types of income listed below when we work out your Pension Credit. Paras 4, 5 & 6 War Widow s Supplementary Pension. Paras 2, 3 & 12 The following additions to War Disablement Pensions: Constant Attendance Allowance; Mobility Supplement; 30

31 How do we work out your income? SPCR sch IV paras 13 & 14 Para 11 Para 1 & 7 Severe Disablement Occupational Allowance; and dependency increases for anyone other than you or your partner. Any income other than social security or war pensions you receive because you suffered a personal injury, or your partner receives because they suffered a personal injury. This includes: payments from annuities set up under a structured settlement; payments from annuities bought from a lump-sum compensation payment; and money from trust funds which were set up with a lump-sum compensation payment. Any payments you receive from a trust fund which was not set up with a lump-sum compensation payment are not counted as long as they are made entirely at the trustees discretion and are for items other than food, ordinary clothing or footwear, household fuel or housing costs. There is no limit to the amount that can be fully disregarded. Income which is partially disregarded There are several types of income which are partially disregarded. This means we ignore part of the income when we work out your Pension Credit: The first 10 of your total (weekly) income from any of the following: War Widow s or Widower s Pension; War Disablement Pension; Guaranteed Income Payments from the Armed Forces Compensation Scheme; foreign payments equivalent to the three types of payments listed above; pensions paid by the German or Austrian government to victims of Nazi persecution; Widowed Parent s Allowance; or Widowed Mother s Allowance. 31

32 How do we work out your income? SPCR sch IV The first 20 of any income you receive from a trust fund if Para 11 payments are made entirely at the trustees discretion and cannot be disregarded in full (see above). Para 11 Paras 8 & 9 Para 10 If any of the types of income listed apply to you, we will disregard (or not count) a maximum of 20 a week. For example, if the first 10 of your War Pension is disregarded and you also have income from a trust (which cannot be disregarded in full), no more than 10 of the money from the trust can be disregarded. Income from letting part of your home and taking in lodgers If you let part of your home to a tenant 13, the first 20 a week of the rent they pay you is ignored. If you have separate tenancy agreements with more than one tenant, the first 20 a week of the rent you get from each tenancy is ignored. If you receive money from a lodger 14 (or boarder) who lives in your home, the first 20 a week plus half of the rest you get from them is ignored. If you have more than one lodger, this part of the amount you get from each lodger is ignored. The amount that is ignored is on top of any disregards from other types of income. If anyone else lives in your home and pays you for their living costs and accommodation (for example, an adult son), these payments will not count as income. However, there may be a deduction from any extra amount you get for housing costs. (See page 22.) Home income plans If you have released equity from your home to buy an annuity, and are paying interest on the loan you took out to do this, part of the annuity income (equal to the amount of interest you are paying) may be ignored A tenant is someone who pays for the right to use at least one room in your home, but not for meals. 14 A lodger is someone who pays you a charge for their accommodation and at least some cooked or prepared meals.

33 How do we work out your income? SPCR sch VI Para 5 Earnings disregards The amount of earnings that is disregarded will depend on whether you are receiving certain benefits, are blind, a carer or a lone parent, and whether you work part time in certain special occupations. The amount of your earnings that is ignored is on top of any disregards on other types of income. Normal disregards In most cases the first 5 of your earnings from work is ignored in the Pension Credit calculation. For couples, the first 10 is ignored. Higher disregards For some people there is a higher earnings disregard of 20. If you have a partner, the first 20 of your joint earnings is ignored. The 20 disregard applies in the following circumstances: Para 1 You are a lone parent (if you do not have a partner and are responsible for a child who lives with you); Para 4 You or your partner get any of the following: Attendance Allowance; Disability Living Allowance; long-term Incapacity Benefit; Severe Disablement Allowance; Mobility Supplement; or the disability or severe disability element of Working Tax Credit; Para 4 You or your partner are registered as blind; Para 3 You get the extra amount for caring responsibilities because you (or your partner) are a carer; Para 2 You or your partner have earnings from one of the following special occupations: a part-time fire-fighter; a member of the Territorial Army or the reserve forces; 33

34 How do we work out your income? a lifeboat crew member or someone manning or launching a lifeboat; or an auxiliary coastguard involved in coast rescue duties. SPCR sch VI Para 4 Para 4A Para 6 SPCR 9 There are special rules for people who were getting 20 of their (or their partner s) earnings disregarded either when they were getting Income Support or income-based Jobseeker s Allowance in the eight weeks before they started to get Pension Credit or when they reached State Pension age. The 20 disregard will continue to apply as long as there are no gaps of more than 8 weeks in either the employment or their entitlement to Pension Credit. The maximum amount that we can ignore from a single person s earnings is 20. The maximum amount of earnings that we can ignore for a couple, if any of these rules apply to one or both of them, is also 20. Earnings from before your Pension Credit application If you stopped work before your Pension Credit started, any payments you get for work you did before (except royalty payments) will be ignored completely. If you were self-employed, this applies if you gave up self-employment before you started to get Pension Credit. Working out your income for savings credit Qualifying income for the savings credit is worked out in the same way as income for the guarantee credit (see pages 26 to 34) but does not include: Working Tax Credit; Incapacity Benefit; Jobseeker s Allowance; Severe Disablement Allowance; Maternity Allowance; or maintenance payments from a spouse or former spouse. 34 Working out your capital Your capital includes money held in whatever form cash, bank and building society accounts, Premium Bonds, investment trusts, shares

35 How do we work out your income? etc. and from whatever source savings, inheritance, redundancy payments, lump-sum grants etc. It also includes the net market value of land and property. SPCA s5 SPCR 21 & 22 If you have a partner, the capital held by both of you will usually be added together and treated in the same way as the capital held by a single person. See page 82 for situations where partners can be treated separately. The value of some types of capital is disregarded (see pages 36 to 40). There is no fixed limit to the amount of capital people can have, but if the net value of your capital is more than 6,000 (or 10,000 if you live permanently in a care home) you will be treated as having an income from it. This is called deemed income and will affect your Pension Credit calculation (see page 44). The actual interest or dividends you get are not used to work out your income. Notional capital Notional capital is capital you do not actually have but are treated as having. We may treat you as having notional capital if you have got rid of capital to get Pension Credit or to get more Pension Credit for example, if you knew you had too much money to get Pension Credit so gave some to your grandchild. But this will not apply if you have used capital to repay or reduce a debt (for example, a mortgage) or you have used it to buy something which was reasonable in your circumstances (for example, the decision maker may decide that replacing a car is reasonable, but buying a Rolls-Royce is probably not). If you are treated as having notional capital, the amount you are treated as having will be reduced over time. If you are getting some Pension Credit, the reduction will be equal to the amount of additional Pension Credit you would have been entitled to had you 35