Hundreds of thousands of state pensioners across the UK are at risk of having a crucial financial top-up stripped away due to an outdated savings rule that has remained frozen for over 15 years.
The £10,000 Savings Threshold Explained
The Department for Work and Pensions (DWP) allows pensioners to hold up to £10,000 in savings and investments without it affecting their Pension Credit entitlement, provided they meet other eligibility criteria. This benefit provides a vital income top-up for those on the lowest retirement incomes.
However, this figure is not a hard cap. For every £500 held in savings above the £10,000 limit, the DWP assumes an extra £1 of weekly income when calculating Pension Credit awards. This gradually erodes the benefit amount a person receives.
Experts Condemn "Unfair" and Outdated Rule
Retirement specialists and former ministers are now calling for urgent reform, arguing the rule punishes sensible savers and has not kept pace with inflation since it was set in 2009.
Stephen Lowe, a director at retirement specialist Just Group, highlighted the double injustice. "This feels unfair on two fronts," he said. "Many pensioners aim to keep a rainy-day fund for emergencies. The limit has not moved since 2009, so more people are seeing their benefit reduced."
He pointed out that the assumed return on savings—treating £500 as generating £1 a week—is the equivalent of a 10.4% annual interest rate, far above anything available on the market.
Henry Tapper, chair of AgeWage and Pension Playpen, stated plainly: "Pension credit is means tested - but the 'means' that are tested aren't what they were because of inflation. Refreshing the amounts people can have... is both just and easy for the DWP to do."
The Wider Impact on Pensioner Poverty
Baroness Ros Altmann, a former Pensions Minister, outlined the broader consequences. She noted that many eligible pensioners are too proud to claim what they see as "handouts," despite the UK state pension being low relative to other developed nations.
The issue extends beyond the cash top-up. Those who miss out on Pension Credit also lose access to a passport to other valuable benefits, including council tax reductions, energy bill rebates, free TV licences for over-75s, and help with healthcare costs.
An update to the savings limit, experts argue, could encourage an estimated 850,000 pensioners who are currently eligible but not claiming to come forward, providing a significant boost to their financial security.
The consensus is clear: a rule designed to support the poorest pensioners is now actively penalising those who have tried to put aside a modest safety net, and its long-overdue review could make a profound difference to retirement living standards.
