Countdown to Pension Credit

The clock is ticking down to October, when the new Pension Credit comes into effect.

The Pension Credit will replace the Minimum Income Guarantee (MIG), which gives a means-tested top-up to those who only have the basic state pension to live on.

But it doesn't apply to those with savings as their extra income counts against them.

The aim of the Pension Credit is to stop penalising those who have saved for their old age.

But millions of pensioners will have to register to get it.

And already you're finding hurdles to overcome in the claiming process.

Naturally, the system is incredibly confusing. There are two basic elements - the guarantee credit and the savings credit, or reward. People might be eligible for either or both.

Guarantee credit:

This is for people aged 60 and over. It replaces the Minimum Income Guarantee, and anyone getting MIG will automatically be transferred.

This credit will bring incomes up to a minimum level, expected to be £102 for a single pensioner and £155 for a couple.

Savings reward:

This is for people over 65. You qualify if your income is less than £139 for a single person or £204 for a couple.

It works on a sliding scale depending on your income, but the maximum credit for a single pensioner is £14.79 and for a couple £19.20.

Some people who have income above the maximum level will still be able to claim - for instance, disabled people or carers.

How the scheme might work

However, one problem when it comes to claiming is that the government assumes the interest rate on savings is 10%.

Even the most astute saver is lucky to get more than 4% in a cash account these days!

But for sums over £6,000, the government insists on 10%, which could rule some people out.

And there are, of course, concerns that people won't claim either because they don't know about the new credits or because it's all too complicated.

Millions unclaimed

It's estimated that in 2000-2001, 670,000 pensioners failed to claim a total of £820m of MIG.

Even the government is concerned that of the 5.5m pensioners eligible for Pension Credit, one-third will not claim.

When you do apply, you must send originals, not photocopies. That worries some people.

"Even if you've got a premium bond, they need to see that," says Jenny Perris from Gloucestershire.

Letters sent out

"If it gets lost in the post or even in their offices, it's going to be a lot of hassle to go to the society to get them to give you a new book."

However, you can arrange to go to your local social security office so an officer can see your documents.

But, most importantly, what should you be doing now?

Early in April the government started sending letters to people who might qualify for the Pension Credit.

The payments are due to start from 6 October this year, but the mailshots will not be completed until October 2004.

In the meantime, anyone who wants to apply can obtain the necessary information from the Department for Work and Pensions website.

Large proportion

Leaflets have been sent to Age Concern and other campaigning groups.

They will be available in Post Offices, doctors' surgeries, Citizens' Advice and libraries from the beginning of October.

With so many people to contact, it is highly likely that a large proportion of qualifying pensioners will be missed out when the first payments are made.

The DWP has given assurances that those who apply late will have their Pension Credit backdated to the beginning of the process.

There is no deadline for applications to be in so people are sure of receiving payments in October.

All the DWP will say is that the forms will be dealt with as quickly as possible.