Sections 1 to 4: Entitlement and amount
Section 1: Entitlement
35.Section 1 provides for a new social security benefit called State Pension Credit (“Pension Credit”) to be payable in accordance with the Act (subsection (1) ).
36.Pension Credit consists of two elements, known as "guarantee credit" and "savings credit". A claimant may be entitled to either or both of those elements (subsection (3)).
37.The purpose of the guarantee credit is to ensure that the claimant has income equal to at least the amount of the "standard minimum guarantee" which, in 2003, is expected to be around £100 for a person who is not a member of a couple (a “single person”) and £154 for a married or unmarried couple (a "couple").
38.The purpose of the savings credit is to provide claimants with a reward for having made some modest provision for retirement above the basic state pension.
39.The guarantee credit and the savings credit each have conditions of entitlement, but two of the conditions are common to both.
40.The first of the common conditions is that the claimant must be in Great Britain (subsection (2)(a)). That condition is the subject of two regulation-making powers set out in subsection (5).
41.Subsection (5)(a) confers power to make provision by regulations as to the circumstances in which a person is to be treated as being in Great Britain. The intention is to exercise the power so that the claimant has to be habitually resident in Great Britain if he is to qualify, which is currently the position with Income Support and income-based Jobseeker's Allowance.
42.Subsection (5)(b) confers power to make provision by regulations for continuing a person's entitlement to Pension Credit during periods of temporary absence from Great Britain. The intention is to continue the current Income Support rules which allow for entitlement to continue for four, and exceptionally eight, week periods abroad.
43.The second of the common conditions is that the claimant must have attained the "qualifying age" for Pension Credit (subsection (2)(b)).
44.The "qualifying age" is defined in subsection (6) (as read with the definition of "pensionable age" in section 17(1)) so that it means, for both men and women, the age which is pensionable age for a woman. That age is currently 60, but between 2010 and 2020 will steadily rise until it reaches 65, the same as pensionable age for a man. The legislation effecting the equalisation of the pensionable ages for men and women is in Part 1 of Schedule 4 to the Pensions Act 1995.
45.In addition to the two common conditions, the claimant must satisfy the further conditions set out in section 2(1) for the guarantee credit or section 3(1) and (2) for the savings credit.
46.Subsection (3) provides for the amount to which the successful claimant is entitled to be found in accordance with section 2 for the guarantee credit (paragraph (a)) and section 3 for the savings credit (paragraph (b)).
Section 2: Guarantee credit
47.The claimant is entitled to the guarantee credit if (in addition to satisfying the two common conditions described above in connection with section 1) he also satisfies the condition in subsection (1), which requires the claimant's "income" not to be above an amount referred to as "the appropriate minimum guarantee".
48.Subsection (2) provides that the amount of the guarantee credit is the amount of the appropriate minimum guarantee less any relevant income.
49.The meaning of "income" for the purposes of the Act is defined by sections 15 and 16, while section 5 provides that, where the claimant is a member of a couple, the income of the other member is to be treated as income of the claimant for the purposes of the Act (and so in effect provides for the aggregation of their income).
50.The "appropriate minimum guarantee" consists of two parts (subsection (3)):
the standard minimum guarantee; and,
various prescribed amounts whose applicability in the case of each claimant is determined by reference to the particular circumstances of the claimant.
51.Subsection (4) provides that the amount of the standard minimum guarantee will be prescribed by regulations and subsection (5) requires there to be one uniform standard minimum guarantee for a single person (expected to be around £100 in 2003) and one for a couple (expected to be around £154 in 2003).
52.Subsection (6) enables the Secretary of State to make regulations substituting a reference to a prescribed amount for the reference to the standard minimum guarantee in subsection (3)(a) in prescribed cases.
53.Where the power is exercised, the prescribed amount does not for any purpose become the standard minimum guarantee, but simply replaces the reference to it in subsection (3)(a), so that that provision effectively reads, for example, "£10" instead of "the standard minimum guarantee".
54.Accordingly, such a substitution does not affect the amount of the claimant's standard minimum guarantee for other purposes of the Act (such as determining the "maximum savings credit" under section 3(7)), but the standard minimum guarantee will not be brought into account for the purpose of determining the claimant's appropriate minimum guarantee (the substituted prescribed amount being brought into account instead).
55.It is intended that the power conferred by subsection (6) will be exercised, for example, in cases where the claimant or, if the claimant is a member of a couple, the other member of the couple remains in hospital for longer than thirteen weeks.
56.It is also intended that the power, as read with the power conferred by subsection (9) to prescribe nil as an amount, will be exercised to substitute "nil" for the reference to the standard minimum guarantee in subsection (3)(a) in cases corresponding to those in paragraphs 7 and 8 of Schedule 7 to the Income Support (General) Regulations 1987 (S.I. 1987/1967) where a nil amount is prescribed. That Schedule prevents prisoners, and members of religious orders who are fully maintained by their order, from receiving Income Support.
57.The power to prescribe "additional amounts" under subsection (3)(b) enables the Secretary of State to make provision for the appropriate minimum guarantee to be greater than the standard minimum guarantee.
58.Where, for example, the claimant is an owner-occupier with housing costs, it is intended that additional amounts will be prescribed in respect of those costs, such as mortgage interest, ground rent or service charges.
59.It is also intended that this power will be used to prescribe an amount additional to the standard guaranteed minimum where, immediately before qualifying for Pension Credit, the recipient was receiving Income Support or Jobseeker's Allowance which included an element of transitional protection. The increase will be included if, without it, the guarantee credit would not maintain, or improve, their previous level of income. The power will also allow for other additions to be made in future without the need for further primary legislation.
60.It is not intended that additional amounts should be prescribed in respect of children, as benefits for children are to become part of the new Child Tax Credit under the Tax Credits Bill.
61.The section requires the power to prescribe additional amounts under subsection (3)(b) to be exercised in two particular cases.
62.The first of these cases, addressed by subsection (7), is where the claimant is severely disabled. The circumstances in which a person is to be regarded as being or not being "severely disabled" will be the subject of regulations under section 17(2)(b).
63.In such cases the intention is that there will be a prescribed additional amount corresponding to the severe disability premium in Income Support. It is expected that in 2003 this will be around £43.45 for a single person and £86.90 for a couple.
64.The intention is that the rules will be the same as those for the receipt of the severe disability premium in Income Support.
65.In the case of a claimant who is a single person, those rules are that:
the claimant must be in receipt of the care component of Disability Living Allowance at the highest or middle rate, or Attendance Allowance at either rate;
there must be no non-dependants aged 18 or over living with the claimant; and
there must be no one receiving Invalid Care Allowance (to be re-named "Carer’s Allowance" – see paragraph 67 below) for looking after the claimant.
66.In the case of a claimant who is a member of a couple, the higher rate mentioned above can be paid if:
both members are in receipt of Disability Living Allowance or Attendance Allowance;
they have no non-dependants living with them; and,
no one is receiving Invalid Care Allowance (to be re-named "Carer’s Allowance" – see paragraph 67 below) for looking after either of them.
67.The second case where an additional amount must be prescribed under subsection (3)(b) is addressed by subsection (8) and is the case where the claimant is entitled, or is a member of a couple the other member of which is entitled, to an allowance under section 70 of the Social Security Contributions and Benefits Act 1992 (allowances for caring for another person). The allowance in question is Invalid Care Allowance but the Regulatory Reform (Carer’s Allowance) Order 2002 (S.I. 2002/1457), which was made on 29 May 2002, changes the name of Invalid Care Allowance to Carer’s Allowance with effect from April 2003.
68.The intention is that the additional amount in such a case will correspond to the carer premium in Income Support. It is expected that in 2003 the amount will be around £25.35.
69.Subsection (9) confers power to prescribe nil as an amount. This power cannot be used to prescribe nil as the standard minimum guarantee, but in combination with the power conferred by subsection (6), it can be used to prescribe nil as the amount that replaces the reference to the standard minimum guarantee in subsection (3)(a).
Section 3: Savings credit
70.Section 3 specifies the conditions that must be satisfied (in addition to the two "common conditions" described in connection with section 1) if the claimant is to be entitled to savings credit (subsections (1) and (2)). It then goes on to explain the calculation for determining the amount of savings credit to which a claimant is entitled (subsections (3) and (4)).
71.The condition of entitlement in subsection (1) is that the claimant has attained the age of 65 or is a member of a couple the other member of which has attained the age of 65.
72.The condition in subsection (2) has two parts, each concerned with aspects of the claimant's income.
73.The first part (paragraph (a)) requires that the claimant has what is referred to as "qualifying income" of an amount that exceeds a figure referred to as "the savings credit threshold".
74."Qualifying income" is addressed by subsection (6), which confers power to make provision by regulations as to income which will or will not be "qualifying income". The intention is that the claimant's "qualifying income" will, broadly, be those parts of the claimant's income which arise from:
contributing to the National Insurance system (for example, a Category A or Category B retirement pension, including additional pension);
the claimant's own retirement provision (for example, an occupational or personal pension, or income from capital);
earnings.
75.The "savings credit threshold" is a prescribed amount (see the definition in subsection (7)). The amount prescribed is expected to be around £77 in 2003 for a single person and £123 in the case of a couple.
76.Savings credit is, however, to be subject to a maximum entitlement, referred to as "the maximum savings credit" (defined in subsection (7)), which is a prescribed percentage (the intention is that it will be 60 per cent) of the difference between:
the standard minimum guarantee (discussed in the Notes on section 2); and
the savings credit threshold.
77.The maximum savings credit is therefore expected to be around:
£13.80 in the case of a single person (60 per cent of the difference between £100 and £77); and,
£18.60 in the case of a couple (60 per cent of the difference between £154 and £123).
78.If the claimant has income in excess of the appropriate minimum guarantee, the savings credit will be adjusted by deducting a prescribed percentage (the intention is that it will be 40 per cent) of the amount by which the claimant's income exceeds the appropriate minimum guarantee.
79.The effect, based on estimates for 2003, is that normally the savings credit is reduced to nil in the case of a single person if the claimant's income is £135 or more and in the case of a couple if the claimant's income is £201 or more.
80.The second part of the condition of entitlement in subsection (2) (paragraph (b)) reflects the provision for reducing the amount of savings credit in circumstances where the claimant has income in excess of the appropriate minimum guarantee. The section provides that there is no entitlement to savings credit where the claimant's income is such that the adjustment has the effect of reducing the savings credit to such an extent that none is payable. The same calculation therefore serves to determine both entitlement to, and the amount of, savings credit.
81.Subsections (2)(b) and (3) together produce the above results by providing that the amount of the savings credit to which a claimant is entitled is the amount by which "amount A" exceeds "amount B" (subsection (3)) and that there must be such an excess if the claimant is to be entitled to savings credit (subsection (2)(b)).
82.Amount A and amount B are defined in subsection (4), but to find their amount involves some further calculation. The following amounts (all of which have been described either in the Notes on section 2 or in the preceding Notes on this section) must be found in the case of the claimant:
the amount of the "income";
the amount of that income which is "qualifying income";
the "appropriate minimum guarantee";
the "standard minimum guarantee";
the "savings credit threshold"; and,
the "maximum savings credit".
83.From those amounts two further amounts that need to be known can be calculated:
a prescribed percentage (expected to be 60 per cent) of the amount by which:
the qualifying income,
exceeds
the savings credit threshold, and
a prescribed percentage (expected to be 40 per cent) of the amount (if any) by which:
the claimant's income,
exceeds
the appropriate minimum guarantee.
84.Subsection (4) defines "amount A” and “amount B”.
85.Amount A will always be amount (7), unless that amount exceeds the maximum savings credit, in which case amount A will be the maximum savings credit.
86.Amount B will be amount (8) in any case where the claimant's income exceeds the appropriate minimum guarantee. In any other case, amount B will be nil (and the amount of savings credit to which the claimant is entitled will accordingly be amount A without any reduction).
87.Section 2(6) makes provision for a prescribed amount to be substituted for the reference to the standard minimum guarantee in section 2(3)(a). Where that happens, the claimant's appropriate minimum guarantee will normally be less than if it included the standard minimum guarantee instead of the prescribed amount substituted for it.
88.That has consequences for the calculation of amount B. Where the standard minimum guarantee is replaced by virtue of section 2(6), a smaller amount of income will be sufficient to exceed the appropriate minimum guarantee and bring the adjusted amount B into operation.
89.It is not, however, intended that, simply because of the application of regulations under section 2(6), the claimant's savings credit should necessarily be subject to that extra degree of adjustment in all cases where those regulations apply, so subsection (5) confers power by regulations to substitute for the appropriate minimum guarantee a prescribed higher amount, but only for the purpose of finding the amount (8) described above.
90.The effect of such a substitution is that the amount (8) described above, and accordingly amount B, will be less than it would otherwise be, or will become nil, and so a smaller amount B falls to be set against amount A.
91.Subsection (8) confers the power to prescribe nil as an amount. This will be exercised to substitute “nil” for the reference to the maximum savings credit in cases corresponding to those in paragraphs 7 and 8 of Schedule 7 to the Income Support (General) Regulations 1987 where a nil amount is prescribed.
92.That Schedule prevents prisoners, and members of religious orders who are fully maintained by their order, from receiving Income Support. See also paragraph 56 above.
93.Annex C to these Notes contains worked examples of the operation of the rules for determining the amount of a claimant's savings credit.
Section 4: Exclusions
94.Section 4(1) provides that Pension Credit shall not be payable to or for a person who is a member of a married or unmarried couple if the other member is entitled to Pension Credit. The intention here is simply to prevent double provision from public funds.
95.Subsection (2) provides that someone who is subject to immigration control within the meaning of section 115 of the Immigration and Asylum Act 1999 will have no entitlement to Pension Credit.
96.Subsection (3) reproduces for Pension Credit the power in section 134(4) of the Social Security Contributions and Benefits Act 1992. The intention is that Pension Credit is not to be paid if entitlement is under ten pence a week, unless payment can be combined with payment of another benefit.
