Low take-up of benefits like Pension Credit not only leaves people in poverty, it can come with extra costs to the public purse

“I was scrimping and scraping. I thought it would be this way for the rest of my life.”

This is what 76-year-old Yvonne said of her life before realising she was eligible for Pension Credit, a financial boost that had benefits beyond just her bank balance.

With her newfound disposable income she no longer has to make excuses when her friends are meeting for coffee or deny herself new clothes when she needs them. She’s experienced a huge boon to her mental health. Crucially, she can now afford to heat her home.

Pensioner poverty levels had dropped to one in 10 by 2012 from a high of one in three back in 1994. This was partially due to increased state support, chiefly Pension Credit.

But levels rose again after 2015, before dropping back slightly during the pandemic. At the same time, figures show that Pension Credit is seriously underclaimed by those who are eligible. Rates hover stubbornly around 66 per cent, meaning hundreds of thousands of pensioners are missing out on cash they’re entitled to.

Pension Credit is means tested, and opens up a host of passported benefits such as help with heating costs and medical expenses as well as Cost of Living Payments.

And it’s not a small amount. Average gains can be north of £3,300 a year, with potentially thousands more unlocked in passported benefits.

Digging into the data

So when the change in circumstances can be life-changing, why are more than three in 10 eligible pensioners not claiming? The DWP knows this is an issue after all, and has been trying to increase awareness.

Well, it’s likely there’s a combination of factors behind the low rates. The shocking findings from Policy in Practice’s Missing Out report earlier this year showed that unclaimed benefits are now worth nearly £19bn annually. As part of the study, they also looked into the causes behind under-claiming.

They include the complexity of the claims process, fragmented support, stigma and simply a lack of awareness that they’re eligible.

These last two factors were most in play when it came to pensioners in poverty who took part in a recent London initiative run by Policy in Practice and the Greater London Authority (GLA).

For some of the pensioners they spoke to, hiding the fact they were struggling was important to them. But for those who were simply unaware that they could be better off, data became key to identifying them and helping them to claim.

Digging into council data from 17 boroughs in the capital meant they could identify eligible households that weren’t claiming. There were more than 8,000 such households, and Policy in Practice wrote to them to let them know they could be claiming. Partners such as Age UK were on hand to help with the application process.

For those who completed the application, the gains were hugely significant. Households were better off by an average of £3,879 a year. And it got better – many payments were backdated, and benefits including Warm Home Discount, Cost of Living Payment, free TV licence and Attendance Allowance were unlocked.

But crucially, and perhaps more surprisingly, pensioners also said that after the process they felt more engaged with their communities and local services.

Data for good

While this data has long been used to identify fraud or chase arrears, Policy in Practice founder and director Deven Ghelani pointed out that we could equally be using it to help people.

It chimes with the ambitions of charity Feeding Britain to introduce automatic enrolment for Healthy Start in England, Wales and Northern Ireland. After all, the data is there and the households that could benefit are some of Britain’s most vulnerable families.

Ghelani recently told BBC Radio 4’s Moneybox that the value of the Pension Credit impact was around £100m across London.

And he said the links with councils and Age UK also opened up access to other services to improve wellbeing and health more generally.

“So if they needed help with housing or if there were exercise at home classes, or things they could participate in they’re now able to improve their lives in that way as well,” he said. “So I think the impact of this campaign goes well beyond the financial.”

The next step is to extend the campaign by returning to the data to identify households that could be eligible for some of the most commonly underclaimed working-age benefits. This includes Healthy Start (or Best Start in Scotland) and free school meals.

It’s not unrealistic to expect the financial benefits will once again be accompanied by a host of health and wellbeing wins too.

Paying for itself

These wins also come with savings to the state. As far as Pension Credit goes, it’s been shown that there’s a strong correlation between low uptake and increased NHS and social care spending.

The 2020 findings, by the charity Independent Age, put a figure on this spending – a cool £4bn a year if 40 per cent of eligible pensioners are not claiming Pension Credit. 

It adds grist to our mill at Clean Slate (home to Quids in! Pro) when we stress that there’s a business case for tackling poverty. A key part of our service is a benefits calculation to identify benefits like Pension Credit that are not being claimed, as well as other money guidance offerings.

While it’s never the principal reason for helping people climb out of poverty, savings to the public purse make a fairly compelling secondary argument.

For Yvonne though, and thousands like her, getting the right benefits in this cost-of-living crisis is a route to thriving rather than just surviving.

• Pension Credit is open to people aged 66 or over. If you think you might be eligible click here or call 0800 99 1234 (0808 100 6165 in Northern Ireland).

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