Labour urged to overhaul crucial pension-age benefit claimed by millions

The government has been told it needs to make major changes to a pension-age benefit claimed by millions if it is to effectively tackle pensioner poverty in the UK.

Claimed by 1.3 million individuals, Pension Credit is designed to bring low-income pensioners’ funds up to a liveable level. Under current entitlement, claimants will see their incomes topped up to at least £227.10 a week.

But more must be done to improve take-up of the benefit, the cross-party Work and Pensions Committee has warned, as well as changes to make it fairer.

Despite being worth up to £4,000 a year, the take-up of pension credit has hovered between 61 and 66 per cent for a decade, with an estimated 700,000 households being eligible but not claiming, the committee found in its report on pensioner poverty.

A taper to pension credit should also be considered to “mitigate the cliff-edge effect” for those who currently miss out, it added.

Under current rules, some pensioners just above income thresholds could end up worse off than those with slightly lower incomes. This is because Pension Credit can ‘passport’ recipients to other benefits such as housing benefit, council tax support, the warm home discount, a free TV licence, and help with dental treatment.

In winter last year, it was also linked to the winter fuel payment, resulting in around around 60,000 extra awards of the benefit. But there is “still a long way to go,” the committee report says.

It also urged the Government to commit to a UK-wide, cross-government strategy for an ageing society to better target support and tackle pensioner poverty.

The number of pensioners in relative low income began rising again in the 2010s, the cross-party group notes, reversing a decline from the 2000s. This was exacerbated by the recent cost of living crisis, with 1.9 million pensioners (16 per cent) now living in relative poverty.

Committee chairwoman Debbie Abrahams said: “To boost incomes, the Government needs to come up with a strategy to increase pension credit take-up. It’s a scandal that so many have missed out for so many years, often through an aversion to claiming benefits altogether, or lack of support.

“The fairness of the pensions credit eligibility criteria where if you are a penny above the threshold, you miss out on thousands of pounds, also needs to be looked at.

“Ultimately, the Government should decide what it thinks is enough for a dignified retirement, and then work to ensure that all pensioners are on at least that level.

A government spokesperson said: “Supporting pensioners is a top priority, and thanks to our commitment to the Triple Lock, millions will see their yearly State Pension rise by £1,900 this parliament. We have also run the biggest-ever campaign to boost Pension Credit take-up, with nearly 60,000 extra pensioner households being awarded the benefit, worth on average around £4,300 a year.

“But we know there is a real risk that tomorrow’s pensioners will be poorer than today’s, which is why we are reviving the Pension Commission, to tackle the barriers that stop too many people from saving.”