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Benefits rule changes could cost pensioners in UK thousands a year

The work and pensions secretary, Amber Rudd, leaves No 10
The work and pensions secretary, Amber Rudd, leaves No 10. Age UK has described the changes as a ‘substantial stealth cut’. Photograph: Mark Thomas/Rex/Shutterstock

Thousands of poorer UK pensioners who have partners of working age could lose up to £7,000 a year in top-ups as a result of imminent rule changes that will require them to claim universal credit as a couple.

Changes slipped out on Monday night by the Department for Work and Pensions mean that from 15 May, 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 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 £7,320 a year.

Age UK described the change as a “substantial stealth cut” and said it could have a devastating effect on the health and wellbeing of some older people and increase the numbers of pensioners in poverty.

Caroline Abrahams, charity director, said: “It is by no means unusual for one partner to be slightly older than the other within relationships and the bigger the age gap between them, the more long-lasting the adverse impact on them will be because of this proposed change.

“That’s why this government policy has been dubbed ‘the toy boy tax’ by some – but that’s not to trivialise the really serious impact it is likely to have on anyone unlucky enough to be subjected to it. For some, the impact will be truly devastating. The government should think again.”

The scale of the potential losses faced by couples could put pressure on existing relationships, say experts, and may persuade them that they cannot afford to marry or move in together.

The average age gap for mixed-age couples is 2.6 years, meaning the cash loss incurred before the younger partner becomes old enough to claim pension credit could be £19,000. Where the gap is greater the potential total lost will be more.

Age UK said pensioners may find themselves in the “absurd position” of being financially better off if they split up and live apart from their partner.

A single person who claims the top-up is eligible for £167.25 a week in pension credit, meaning that in theory a pensioner will be better off staying “solo” for benefit purposes rather than claiming with a partner.

Gareth Morgan, a benefits expert, said a single person getting pension credit who forms a relationship with a person of working age would lose their entitlement to that benefit and would have to claim universal credit as a couple.

However, if they were to separate again, even if they remained living in the same home but as separate households, their total incomes would increase substantially. This is because a single person’s pension credit combined with a single person’s universal credit amounts to more than a couple’s universal credit payment.

“It would be surprising if the DWP didn’t have to make substantial numbers of assessments about the genuineness of relationship breakdowns,” said Morgan.

Currently, people who reach retirement age and are eligible can claim pension credit regardless of the age of their partner. In future they will have to wait until their partner also reaches 65, although the state retirement age will be increased to 66 in October 2020.

Couples with one partner under state pension age who are already in receipt of pension credit will be unaffected. But they will be moved to the new system if their circumstances change, such as a change of address, or even if the pensioner partner goes abroad for longer than a month.

If a mixed-age couple claim universal credit, the pensioner partner will not be required to look for work as a condition, unlike working-age claimants. The government says the younger partner’s claimant conditions will be tailored to meet the couple’s circumstances.

The pension credit change has been in place since the Welfare Reform Act 2012, but ministers put off its introduction until universal credit was fully rolled out. Last month universal credit moved into every Jobcentre Plus area of the UK.