MPs have urged the Government to overhaul the benefit – worth up to £4,000 a year for the poorest pensioners – to open it up to more people
Ministers should introduce a taper to pension credit to expand eligibility and avoid a “cliff edge” which sees elderly households missing out entirely on support, MPs have said.
They have urged the Government to overhaul the benefit – worth up to £4,000 a year for the poorest pensioners – to open it up to more people.
Under current rules, pensioners just above income thresholds could end up worse off than those with slightly lower incomes, the Commons Work and Pensions Committee said.
Tapering it would allow those on the cusp of eligibility to still claim smaller amounts of pension credit.
The take-up of pension credit has hovered between 61 per cent and 66 per cent for a decade, with an estimated 700,000 households being eligible but not claiming, the committee said.
The benefit also allows claimants access to other benefits including housing benefit, council tax support and the warm homes discount.
In the past year, it was also the passport for those wishing to claim the winter fuel payment after the Labour Government restricted eligibility for the previously universal benefit.
Ministers have since backtracked and said they would be awarding winter fuel payments to more pensioners.
Minister for pensions Torsten Bell said everyone over pension age in England and Wales with an income up to and including £35,000 would benefit from a winter fuel payment in 2025-26.
It is estimated nine million pensioners will receive the winter fuel payment.
The idea was proposed by the Resolution Foundation when Torsten Bell ran it (Photo: Malcolm Cochrane Photography)
The committee said the decision to link the winter fuel payment to pension credit “shone a spotlight on this ‘cliff edge’” with pension credit.
“Pensioners just above the threshold told us in strong terms that this was unfair, and organisations working with older people outlined severe hardship in this group,” the report said.
“We heard that some form of taper could offer a solution, and that the planned merger of pension credit and housing benefit from 2026 was an opportunity to implement this.”
Work and Pensions Committee chairwoman Debbie Abrahams – who was one of the leading figures in pressuring the Government to back down over its disability welfare cuts – described it as a “scandal that so many have missed out for so many years” by not claiming pension credit.
“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,” she added.
The cross-party group of politicians also urged the Government to introduce a new strategy to boost take up of pension credit by the end of 2025.
The committee also said benefit top-ups such as pension credit and housing benefit are not stopping people from falling into poverty, and urged the Government to launch a national cross-departmental strategy looking at deprivation among pensioners.
The report, published on Thursday said the Government must decide on – and ensure – a minimum level of retirement income with a plan for everyone to reach that level.
And the state pension must provide the amount needed for a “minimum, dignified, socially acceptable standard of living”, the committee said.
On Tuesday, Rachel Reeves said that a review into raising the state pension age is needed to ensure the system is “sustainable and affordable”.
The state pension age is currently 66, rising to 67 by 2028, and the government is legally required to periodically review the age.
The Women’s Budget Group argued a staggered approach to pension credit was necessary to tackle the inequality seen in the levels of pensioner poverty faced by women, in particular.
Dr Daniella Jenkins, policy adviser, said: “Any strategy, commission or review of the pension systems must look to make it more progressive.
“That means looking at low paid workers’ employers contributing to private pensions before they do; it means staggering the thresholds for access to pension credits including for unpaid carers; and it means changing the pension tax reliefs that benefit high earners twice over.”
Age UK director Caroline Abrahams welcomed the report and condemned the “lack of focus from our political leaders in preventing and tackling pensioner poverty”.
She said the charity backed the need for a cross-government strategy with a specific commissioner appointed to look at the lives of older people, as well as a social tariff for energy and a strategy to promote benefit uptake.
A Government spokesperson said supporting pensioners was “a top priority” and said it had run “the biggest-ever campaign to boost pension credit take-up, with nearly 60,000 extra pensioner households being awarded the benefit”.