PC10S – A detailed guide to Pension Credit for advisers and others (January 2021) Contents ABOUT PENSION CREDIT .................................................................................................................... 7 WHAT IS PENSION CREDIT? ................................................................................................................... 7 Guarantee Credit ............................................................................................................................. 7 Savings Credit - for people who reached State Pension age before 6 April 2016 .......................... 7 Who can qualify for Savings Credit ................................................................................................. 7 PENSION CREDIT QUALIFYING AGE.......................................................................................................... 8 HOW PENSION CREDIT IS WORKED OUT ......................................................................................... 9 GUARANTEE CREDIT .............................................................................................................................. 9 OVERVIEW OF HOW GUARANTEE CREDIT IS CALCULATED ...................................................................... 10 The ‘appropriate amount’ .............................................................................................................. 10 The standard amount .................................................................................................................... 11 The extra amount for carers .......................................................................................................... 11 The extra amount for severe disability .......................................................................................... 12 The extra amount for housing costs .............................................................................................. 13 The transitional extra amount........................................................................................................ 13 The extra amount for children ...................................................................................................... 14 SAVINGS CREDIT ................................................................................................................................. 15 Qualifying conditions from 6 April 2016 ........................................................................................ 15 Savings Credit calculation ............................................................................................................. 16 WHO IS ELIGIBLE FOR PENSION CREDIT? ..................................................................................... 17 AGE: ................................................................................................................................................... 17 MIXED-AGE COUPLES: CHANGES FROM 15 MAY 2019 ............................................................................ 17 PENSIONS FLEXIBILITIES .................................................................................................................. 23 HOW PENSION CREDIT IS AFFECTED ..................................................................................................... 23 Pot left untouched ......................................................................................................................... 23 Regular drawdown ........................................................................................................................ 23 Lump sum drawdown .................................................................................................................... 23 Re-valuing the pension pot ........................................................................................................... 23 Withdrawing the whole pot at once ............................................................................................... 24 Annuity purchased ........................................................................................................................ 24 Spends all or part of the pot .......................................................................................................... 24 INCOME RULES ................................................................................................................................... 24 Rules for couples .......................................................................................................................... 25 HOW WE WORK OUT INCOME FOR PENSION CREDIT ............................................................................... 26 If your customer is a self-assessment taxpayer ............................................................................ 26 What counts as income for Guarantee Credit? ............................................................................. 26 What doesn’t count as income ...................................................................................................... 27 Weekly calculations ....................................................................................................................... 27 Notional income ............................................................................................................................ 28 WORKING OUT INCOME FOR SAVINGS CREDIT ....................................................................................... 28 HOW WE WORK OUT EARNINGS ............................................................................................................. 29 People who work for an employer ................................................................................................. 29 1 People who are self-employed ...................................................................................................... 29 Childminders ................................................................................................................................. 30 INCOME DISREGARDS ....................................................................................................................... 30 INCOME THAT IS WHOLLY DISREGARDED ................................................................................................ 30 INCOME THAT IS PARTIALLY DISREGARDED ............................................................................................ 32 Trust funds .................................................................................................................................... 32 Income from tenants and lodgers ................................................................................................. 32 Home income plans ...................................................................................................................... 33 EARNING DISREGARDS ......................................................................................................................... 33 Normal disregards ......................................................................................................................... 33 Higher disregards .......................................................................................................................... 34 Special rules .................................................................................................................................. 34 EARNINGS FROM BEFORE AN APPLICATION ............................................................................................ 35 HOW WE WORK OUT CAPITAL FOR PENSION CREDIT ................................................................ 35 CALCULATIONS FOR COUPLES .............................................................................................................. 35 DISREGARDED CAPITAL ........................................................................................................................ 35 DEEMED INCOME ................................................................................................................................. 36 NOTIONAL CAPITAL .............................................................................................................................. 36 Reduction over time ...................................................................................................................... 36 CAPITAL DISREGARDS ...................................................................................................................... 36 PERSONAL POSSESSIONS .................................................................................................................... 37 HOUSES AND LAND .............................................................................................................................. 37 CERTAIN TYPES OF EARMARKED CAPITAL .............................................................................................. 38 LIFE INSURANCE POLICIES .................................................................................................................... 38 FUNERAL PLANS .................................................................................................................................. 38 FAR EASTERN PRISONERS OF WAR PAYMENT ...................................................................................... 39 SECOND WORLD WAR COMPENSATION PAYMENTS ............................................................................... 39 LUMP-SUM PERSONAL INJURY (INCLUDING