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Why the Government is wrong to change the pension credit rules

Couple reading newspaper
"We call on the Government to change their minds."



It was early Monday evening: darkness had fallen and in Westminster all attention was on the ‘meaningful vote’ in Parliament the following day. On College Green the media tents were being erected and ‘beyond the bubble’ the news bulletins contained little other than speculation about how the vote would turn out.

This was the moment chosen by the Department for Work and Pensions to ‘announce’ that they intend to implement what some have dubbed ‘the toy boy tax’ in four months’ time – the effect of which is to debar a pensioner of either gender from claiming pension credit until their partner, whether male or female, also attains their own state pension age. The mechanism they chose was to lay a Written Ministerial Statement in Parliament, the most understated communication channel available to governments. The title was innocuous too – ‘Pensions Update’.

Yet if it is brought in on May 15th, as the Government intends, this measure will slash the incomes of the couples affected who claim Pension Credit in the future, by up to £7,000 a year in the worst cases, compared to current rules. In addition, although in theory this only applies to future claimants it will actually also hit any pensioner in a mixed age couple currently in receipt of pension credit whose claim is interrupted.  This policy change, therefore, has massive ramifications, yet the decision was made to ‘sneak’ it out – presumably in an effort to ‘bury bad news’.

Why does this make so much difference to people in these situations? Because pension credit is only available to pensioners on a very low income and if they claim it it usually makes the difference for them between living below or above the poverty line. In fact pension credit is the single most important poverty alleviation mechanism for older people that we have in this country and now the Government has apparently decided to withdraw it from those who happen to have a younger partner.

The consequences are huge because the pensioner partner will, in many cases, actually be eligible for more money from their pension credit than they and their partner can get collectively as a couple from universal credit. This may seem bizarre but it is the result of working age benefits being set so low. The Government’s rationale for this is that it provides a strong incentive for people of working age to get a job; whether you agree with this idea or not the fact is though that Universal Credit was never designed for people who have reached pension age, who are by definition not of working age.

In fact, this policy change has been something of an unexploded bomb, ticking away on the statute book since 2012 but never actually put into effect. At Age UK we hoped that this would continue to be the case for the foreseeable future, given the very serious impact on the individuals and couples involved, of which the Department for Work and Pensions is fully aware. I am very sorry to say that we were wrong and this unexpected change of tack appears to be a decision made by the incoming Secretary of State, Rt Hon Amber Rudd MP.

The measure itself threatens to be devastating for anyone affected and pensioner poverty is likely to increase as a result. In fact a trend towards rising pensioner poverty had already started to emerge in the last two years, after a lengthy period in which it had reduced; this will intensify it.

It seems totally unfair that as a result of this policy change two pensioners in identical financial circumstances stand to receive such different sums of money to live on by the State, simply because one has a partner of pensionable age and the other a partner who is younger. The bigger the age difference the more long-lasting the impact will be.

What’s more, this measure gives a strong incentive to pensioners in these mixed age couples to split up from their partner and live apart from them – a £7000 difference in annual income when money is really tight is so significant that people will surely be unable to dismiss this out of hand.

So much for supporting families, and the informal caring arrangements that are often going on in them among people in the age group affected – these principles are apparently to be sacrificed.  And for what? One can only conclude that the motivation is to cut costs, regardless of the impact on the people concerned. In this regard it is also worth considering that many who will be caught by the policy change are likely to be women born during the 1950s – precisely the group who have been impacted by other government decisions to raise the state pension age – the ‘Waspi generation’. Anyone hit by this ‘double whammy’ will be entitled to feel especially aggrieved.

This policy change is then it seems really a stealth tax on ageing couples on low incomes. Of all the members of our older population they are among those least likely to be able to sustain a big cut in their incomes without experiencing real hardship. At Age UK we therefore strongly oppose it and we are also surprised and disappointed that the Department for Work and Pensions tried to slip it out under the cover of this week’s Westminster turmoil.

We call on the Government to change their minds.

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Last updated: Oct 21 2019

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