Government accused of using Brexit vote to bury pension credit cut that could cost some older couples more than £7,000 a year
- Changes to pension credit will be enforced from May 15 this year
- ‘Mixed age’ couples, where only one partner has reached the pension age of 65, will no longer be eligible for pension credit
- The change could see some couples lose more than £7,000 a year, because working age benefits are usually less generous than pension credit
Ministers have been accused of using the looming Brexit vote to bury bad news about changes to a state pension top-up that could leave some older couples more than £7,000 worse off.
The Department for Work and Pensions yesterday announced that planned cuts to pension credit – a top-up available to the poorest pensioners – will be enforced from May this year.
Currently, so called ‘mixed age’ couples, where only one partner has reached the pension age of 65 while the other is not, can claim pension credit if they wish because one of them is over state pension age.
Pension credit cut: ‘Mixed age’ couples will no longer be entitled to the benefit from May 15
But from May 15 this year, such couples will no longer be eligible for pension credit. They will, instead, be entitled to apply for Universal Credit, which merges six benefits into one.
In a statement released late yesterday, pensions minister Guy Opperman said: ‘Pension Credit is designed to provide long-term support for pensioner households who are no longer economically active. It is not designed to support working age claimants.
‘This change will ensure that the same work incentives apply to the younger partner as apply to other people of the same age, and taxpayer support is directed where it is needed most.’
But Steve Webb, director of policy at Royal London, said this change could see some couples lose more than £7,000 a year, because working age benefits are usually less generous than pension credit.
How much is the state pension?
The basic state pension is currently £125.95 a week, and will rise to £129.20 next April. It is topped up by additional state pension entitlements – S2P and Serps – accrued during working years.
The two-tier state system has changed for people retiring since 6 April 2016, when it was replaced by a new ‘flat rate’ state pension. This is currently worth £164.35 a week, and will rise to £168.60 in April.
People who have contracted out of S2P and Serps over the years and retire after April 2016 get less than the full new state pension.
Webb said the rate of pension credit for a couple is currently £255.25 per week, or £13,273 per year, while the rate of universal credit for a couple is £498.89 per calendar month or £5,986.68 per year.
That’s a difference of £7,286 per year, Webb said. He added that the changes to eligibility will put pressure on the younger person in the couple who has not yet reached pension age to seek work.
‘Under the proposed rules, couples where one partner is over pension age and is not expected to seek work will get the same rate as a couple where both partners are under pension age and both are expected to seek work,’ he said.
Webb said the change means that some couples could lose thousands of pounds depending on whether their claim falls a day before or a day after the May deadline.
He added: ‘People who may be affected deserve to know about this change and not have it sneaked out on a day when ministers were no doubt hoping that everyone’s attention was directed somewhere else’.
‘Mixed age’ couples can still apply for the pension credit up to the 14th of May, so if you think you can qualify for the benefit, you should not delay your application.
And the change will not affect existing claimants – only new ones.
But if a mixed age couple temporarily loses their eligibility for pension credit, because, for example, they see a temporary increase in their income or one of them travels abroad to see relatives for just over four weeks, they will also not be allowed to make a fresh claim after May 15.
Charity Age UK said the policy change also effectively means that many pensioners might find themselves in the position of being financially better off if they split up and live apart from their partner.
This is because once the change is implemented, the pensioner partner will, in many cases, actually be eligible for more money from their Pension Credit than they and their partner will get together from Universal Credit.
Caroline Abrahams, charity director at Age UK, said: ‘It is by no means unusual for one partner to be slightly older than the other within relationships and the bigger the age gap between them, the more long-lasting the adverse impact on them will be because of this proposed change.
‘That’s why this Government policy has been dubbed ‘the toy boy tax’ by some – but that’s not to trivialise the really serious impact it is likely to have on anyone unlucky enough to be subjected to it. For some, the impact will be truly devastating. The Government should think again.’
These reforms to pension credit were approved by Parliament in 2012, while news of their implementation were unveiled last night after 7pm.