How can benefits help with pension planning and retirement income

How can benefits help with pension planning and retirement income

Benefit entitlements when making pension contributions

Contributing to your pension scheme offers great tax benefits, a topic we’ve covered in a previous post. In addition to great tax benefits, pension contributions can also increase your benefit entitlements. This is what we’ll be covering in this post.

Universal Credit is a benefit many working people receive in order to top up their income. The total amount you’ll get depends on several things: whether you have a partner, your number of dependents and housing costs. Then, the benefit amount is reduced by 63p for every £1 in your take-home income.

The great news is that for Universal Credit, all your pension contributions are disregarded in the take-home income calculation. For example, if your monthly take-home income is £600 and you are contributing £100 to your pension, your reduction in Universal Credits is £315 instead of £378.

In other words, for each £100 in pension contributions, you earn an additional £63 in Universal Credits. This gives people who may be struggling to save for their pensions and are claiming Universal Credit a strong incentive to make pension contributions.

Another factor with pension savings, as opposed to other types of savings, is that your pension pot does not count towards the overall savings’ maximum threshold when calculating benefit entitlements. For this reason, setting money aside into a pension pot will mean that any pots you’ve built-up do not affect your benefit entitlements.

Benefits after State Pension Age

Universal Credit ceases once you (and your partner) reach State Pension Age. The reasoning being that the full State Pension should provide people with a minimum level of income. However, not everyone will receive a full State Pension if they do not have enough qualifying national insurance contributions, or have meaningful private pensions.

The main benefits that you can claim after State Pension Age are the Pension Credit and Housing Benefits. Similarly to Universal Credits, the income you get from State Pension and private pensions reduce the amount of benefits you can receive. For this reason, those with limited pension pots could defer their pension withdrawals and substitute that income with Pension Credit and Housing Benefits.

Another advantage of receiving Pension Credits is that you can be entitled to additional benefits such as Warm Home Discount Scheme, Winter Fuel Payment or free NHS prescriptions.

Understanding benefit entitlements and how to claim them

The examples above cover situations where you may be entitled to benefits to help save for a pension, or top up your income in retirement. However, as ever, it is more complicated than this and the total income you are entitled to will vary from person to person depending on your particular circumstances.

We believe everyone, whether they are below, or above State Pension Age, should be able to find out clearly what benefits they are entitled to. To support our users with this, we have teamed up with Inbest.

provides this great, free questionnaire journey and calculator here to help you understand exactly what you are entitled to, along with further information on how to claim any entitlements. 

By giving it a try you’ll be able to make sure you are not missing out on any benefits, which may help you build your pension or increase your retirement income.

Are you adding benefits to your retirement plan?

Once you know what benefits you are entitled to and how these may affect your income, you can use the Guiide calculator to help you make an accurate plan for your retirement.