State Pension Credit: What happens to your credits when you start drawing your pension? | Personal Finance | Finance

Pension Credit is a tax-free means-tested benefit for retired persons on low incomes. In the current economic climate, every penny counts more than ever. But could your pension credit be affected when you begin drawing your State Pension?

What is Pension Credit?

Pension Credit provides an additional retirement income if you are on a low income.

It is made up of two parts: Guarantee Credit and Savings Credit.

For the 2020/2021 tax year, Guarantee Credit can see your weekly income topped up by £173.75 a week if you are single or £265.20 if you are married or in a civil partnership.

Savings Credit could provide single persons with an additional £13.97 a week or married couples and civil partners with an additional £15.62 a week.

READ MORE: State pension UK: These households can get Universal Credit as well

Only people who reached State Pension age before April 6, 2016 are eligible to claim the Savings Credit part of Pension Credit.

Savings Credit provides some extra money if you have made some provision towards your retirement by saving, or with a pension other than the basic State Pension.

To qualify for pension you must:

Live in the UK – England, Scotland, Wales, or Northern Ireland

Have reached state pension age (currently rising from 65 to 66 for both men and women in October).

Fundamentally, Pension Credit is designed to be a “top up” to one’s income in addition to other sources of income you have.

If your total income from earnings and your pension is short of this target amount you will be entitled to a top up payment to bring up your total income to that level.

This means when you begin drawing your State Pension, you may receive an equivalent reduction in your Pension Credit income.

Some sources of income are disregarded when calculating your Pension Credit amount, including Attendance Allowance.

The first £5 per week of any earnings is also ignored.

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