01st Feb 2019

‘Sneaky’ pension credit announcement could impact the poorest of pensioners

With all the Brexit shenanigans currently ongoing, perhaps the Department for Work and Pensions (DWP) hoped the press and the pension industry would miss its announcement about new rules around pension credit which will come into force from the 15 May 2019.

New pensioners whose partners are younger than the State Retirement Age of 65 can no longer claim a means-tested top-up called pension credit. Instead they will be forced to claim the much less generous, and often derided, universal credit alongside their younger partners.

The couple rate of universal credit is £114.81 a week compared with £255.25 for a couple receiving pension credit. This amounts to a potential loss of over £7,000 a year. This could impact thousands of people – and it’s the poorest pensioners that will feel the greatest hit.

Critics have accused the DWP of being sneaky and of trying to bury the bad news in the distraction of Brexit – which is not a new concept by any means.  Age UK described it as a substantial stealth cut. They have a valid point, as there are many couples who are with partners of different ages – the bigger the age difference the bigger the cut. Even in the circumstances where couples have an average age difference of 2.6 years there could be a loss of £19,000 before the younger person becomes old enough to claim pension credit.

The government’s response to the criticism was to explain that the change ‘was to 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.’

Curious timing aside, this particular case does serve to highlight once again, not just the complexity of the system but also how setting an arbitrary date, in this case 15 May, will impact upon thousands of people who are given very little notice or consultation. This is similar to the DWP’s poor handling of changes to the women’s State Pension Age where those with a certain date of birth found they were having to wait years longer than originally expected for their pension.

For our clients, we continually advise both employers and trustee boards regarding the importance of good, clear and timely communication. Even the most bitter of pills is easier to swallow with sufficient advance warning and a full explanation behind the decision. Perhaps it is time we called the DWP and offered to assist!