How pensions affect Pension Credit and other benefits

Pension Credit is extra money to help with living costs if you are over State Pension age and on a low income, and it is separate from your State Pension¹. Having a private or workplace pension does not stop you qualifying: you can get Pension Credit even if you have other income, savings or own your own home¹. What matters is how much income you have, because Pension Credit tops up your weekly income to £238 if you are single, with a higher figure for couples².

The rules work in two steps. First, your income is added up: your State Pension, other pensions, most social security benefits such as Carer's Allowance, and any earnings from employment or self-employment all count². Second, your savings are looked at separately: the first £10,000 is ignored, and every £500 above that is treated as £1 a week of extra income². There is no savings limit at which Pension Credit stops altogether, which makes it unusual among means-tested benefits³.

This page explains how pension income and savings are counted, what happens when you take money out of a pension pot, the extra help a Pension Credit award can unlock, and when you must report a change.

How pension income counts towards Pension Credit

When you apply for Pension Credit, your income is calculated, and if you have a partner, your income is calculated together². The income that counts includes your State Pension, any other pensions, most social security benefits (Carer's Allowance is given as an example), and earnings from employment or self-employment². Independent guidance describes the same list: earnings, pension income, some benefits and savings over £10,000 are all taken into account when entitlement is worked out⁵.

The government looks at all of your income when you apply, including the State Pension and any income from other pensions, as well as income from employment or self-employment⁶. For the official calculator, the net figure for all your taxable income is taken into account, and before you start you need details of your earnings, benefits and pensions, savings and investments, and the same details for your partner if you have one⁷.

Two points in this calculation often surprise people:

• A pension you have not claimed yet still counts. If you are entitled to a private or workplace pension, the amount you would expect to get is calculated as income from the date you were able to get it, if you had claimed it². Deferring a private pension does not keep it out of the assessment.
• Money earned after State Pension age counts too. Earnings after State Pension age may affect income-related benefits such as Pension Credit and Housing Benefit⁸. In Northern Ireland, staff at the Northern Ireland Pension Centre can tell you how income from paid work will affect your Pension Credit and other benefits⁸.

A higher income does not automatically rule you out. If your income is higher than the top-up amounts, you might still be eligible for Pension Credit if you have a disability, you care for someone, you have savings or you have housing costs². Carers should also know that caring credits count towards the State Pension⁹, and that a Carer Addition of £48.15 per week can be paid with Pension Credit, Housing Benefit or Council Tax Reduction¹⁰.

Living with family does not put your claim at risk either. You can still get Pension Credit if you are living with your family: the Northern Ireland Pension Centre looks at your income, not theirs². Similarly, you can still get Pension Credit if you own your own home, because the home you live in does not count as capital².

Savings and pension pots: the £10,000 capital threshold

Savings and investments of £10,000 or less do not affect your Pension Credit at all². Above that threshold, every £500 over £10,000, or part of £500, counts as £1.00 of income a week². The House of Commons Library describes the same rule as a "deemed income" of £1 a week for every £500 of capital above £10,000¹¹. Independent charities put it the same way: for every £500, or part of £500, over £10,000, an extra £1 of weekly income is assumed¹².

What makes Pension Credit different from most means-tested benefits is that there is no upper capital limit. Official benefit rate tables for 2026/27 confirm there is no upper limit for Pension Credit and for those getting Housing Benefit with Pension Credit Guarantee Credit, and that the first £10,000 of capital is disregarded¹³. A Welsh council's guidance makes the same point: unlike other income-related benefits like Universal Credit, there is no capital cut-off limit for Pension Credit⁴. Capital above £10,000 is not ignored, though: for every £500, or part of £500, over that threshold, an extra £1 of weekly income is assumed, which reduces the award¹⁰. So a person with £30,000 in savings can still be paid Pension Credit, but the assumed income from those savings is counted first, which may reduce the award to nothing in practice.

The £10,000 disregard is shared with Housing Benefit for people above State Pension age¹⁴, which matters because the two benefits are often claimed together. The Resolution Foundation notes the same rule from the other direction: if a claimant has more than £10,000 in savings, the amount of Pension Credit they receive reduces¹⁵.

Taking money from your pension and what it means for benefits

Pension Credit is separate from your State Pension¹, and the two are often confused. Your State Pension counts in full as income for Pension Credit, as do private and workplace pensions². People who do not qualify for a State Pension at all might still be eligible for Pension Credit or other benefits and financial support¹⁶, and those earning a wage while receiving a pension, or self-employed with a pension and a low income, may also be able to claim¹⁷.

Taking money out of a pension changes how it is treated. While money is inside a pension pot it is not savings for these purposes, but once it is withdrawn it becomes capital and the £10,000 rule applies to it. Scope's guidance on lump sums and benefits confirms that under £10,000, your Pension Credit is not affected by your savings¹⁸. If you are under State Pension age and on Universal Credit, the treatment is harsher: the amount of pension you receive is deducted from your Universal Credit amount and treated as income¹⁹.

A few specific rules sit around the edges:

• Deferring the State Pension. Customers claiming Pension Credit will not build up extra State Pension or a lump sum for days in receipt of Pension Credit from 6 April 2011²⁰.
• Divorce and pension sharing. It may be possible for a credit member to commute some of their pension to receive a tax-free lump sum, depending on the specific scheme regulations²¹.
• Debt assessments. HMRC treats pension payments as income, including any lump sums on retirement, when assessing ability to pay a debt²².

The practical point is timing. A lump sum taken from a pension becomes savings, and savings above £10,000 generate deemed income that reduces Pension Credit week by week. Money left in the pot does not. The tax-free lump sum and the wider options for taking money from a pension are covered elsewhere on the site.

Even a small Pension Credit award opens other help

The strongest reason to claim even a small amount of Pension Credit is what comes with it. Even a small award of Pension Credit can provide access to a wide range of other benefits²³. The official guidance is blunt about eligibility: you could be eligible for Pension Credit even if you have a pension, savings or own your own home²⁴.

The linked help includes Housing Benefit if you rent the property you live in, Support for Mortgage Interest if you own the property you live in, and a Council Tax discount²⁵. Which? lists further support that claiming can make you eligible for: help with housing costs, a free TV licence for over 75s, access to free NHS dental treatment and glasses, and Winter Fuel Payment and Cold Weather Payment²⁶. In Northern Ireland, the Home Heating Oil Support Scheme is open to people in receipt of income-related benefits including Pension Credit²⁷.

If you are awarded Pension Credit, you can also receive extra payments if you have a severe disability, you care for someone else, or you are responsible for a child or young person²³. Getting Attendance Allowance can itself open extra Pension Credit, Housing Benefit or Council Tax Reduction²⁸. Budgeting Loans, which help with one-off essential expenses, are available if you get Pension Credit or certain other benefits²⁹.

The amounts are not always tiny. The average weekly amount of Pension Credit increased from over £67 to over £75, according to the government's Pension Credit toolkit³⁰. A Welsh council guidance document puts the average payment at over £65 per week, well over an extra £3,000 per year⁴. Older reporting put the average at around £58 a week³¹, so the figures vary by date and source, but all of them are far above "a few pounds". Where the amount payable is less than £1.00 per week, Northern Ireland legislation allows the Department to direct that it be paid at intervals of up to 13 weeks³².

Housing costs: Housing Benefit, council tax reduction and mortgage interest

Pension Credit can also help with housing costs such as ground rent or service charges¹. Beyond that, three main forms of housing help connect to it.

Housing Benefit is available if you rent the property you live in¹. For those receiving Guarantee Pension Credit, the maximum amount of Housing Benefit they are entitled to is paid³³. The £10,000 capital disregard applies to Housing Benefit for those above State Pension age, and there is no upper capital limit for those getting Housing Benefit with Pension Credit Guarantee Credit¹³.

Council Tax Reduction is another linked entitlement. Receiving Pension Credit means you are also eligible for housing benefit and a council tax reduction³¹, and a Council Tax discount is listed among the related help²⁵.

Support for Mortgage Interest is the equivalent help for homeowners: it is listed for Pension Credit recipients who own the property they live in²⁵.

Two warnings belong here. First, mixed-age couples: from 15 May 2019, changes to entitlement conditions mean that where a younger partner joins the household, the Pension Credit claim will also be terminated³⁴. Second, care homes: Pension Credit counts as income when your contribution to residential care or nursing home fees is assessed³⁵.

In Scotland, Pension Age Disability Payment exists alongside Pension Credit, and if an award changes or stops following a review, this could affect other benefits being received, and the local council, HMRC and the Department for Work and Pensions are among the bodies that must be told about changes³⁶. Being awarded another benefit must also be reported, as it might affect entitlement³⁷.

Reporting changes in your income or savings

If your personal circumstances or your income or savings change, you must report this, as it could affect your eligibility for Pension Credit³³. The way to report is to call the Pension Service helpline or report changes by post³⁸.

The consequence of not reporting is set out in official guidance: your claim might be reduced or stopped if you don't report a change straight away or you give incorrect information³⁹. The Pension Credit estimate you may have used can also become incorrect if you input incorrect or incomplete information, your circumstances change, or benefit rates and rules change⁷.

One exception applies in Northern Ireland: if you receive Pension Credit and have been awarded an Assessed Income Period, you don't need to tell the Northern Ireland Pension Centre about changes to your occupational pensions⁴⁰. A further effect to know about: if you receive Pension Credit, the amount you get may decrease if you are in hospital for more than four weeks⁴⁰.

Where to get help checking your entitlement

The quickest first step is the government's Pension Credit calculator, which gives an estimate of how much Pension Credit you could get⁷. You can find it at www.gov.uk/pension-credit-calculator⁴, and it can be used to see if you might qualify³³. Which? describes checking eligibility this way as easy⁴¹.

For information on how to apply, contact the Pension Service⁴². Several independent organisations offer free help with checking entitlement:

• Independent Age publishes guidance on Pension Credit and runs a "Don't miss out on Pension Credit" campaign¹².
• Advice NI provides benefits advice in Northern Ireland, including for retirement benefits⁵.
• Law Centre NI runs a cost of living guide with help for older people²³.
• Turn2us operates a grants service for people on low incomes, including those getting Guarantee Pension Credit⁴⁴.
• Carers UK explains Pension Credit for carers of pension age, including in Scotland³³.
• MoneyHelper sets out the benefits and tax credits carers can claim, including the Carer Addition¹⁰.

The scale of unclaimed Pension Credit is large. Which? has reported on millions missing out on £3,000 of Pension Credit³¹, and over 11 million pensioners received information about Pension Credit with the notification of increases to their State Pensions from April 2024⁴⁵. A Work and Pensions Committee has called for a national strategy to tackle pensioner poverty⁴⁶, and the average weekly amounts cited above³⁰ give a sense of what is being left unclaimed. For the wider picture of retirement income, see the pensions guide and how much you need to retire.