Recommendation 35

The reason the new State Pension was set above the Pension Credit Guarantee was to improve savings incentives. However, over the years more ‘passported benefits’ have become linked to it, meaning that being just a few pounds above Pension Credit level can now mean missing out on thousands of pounds of passported benefits. The decision to link the Winter Fuel Payment to Pension Credit shone a spotlight on this ‘cliff- edge’. Pensioners just above the threshold told us in strong terms that this was unfair, and organisations working with older people outlined severe hardship in this group. We heard that some form of taper could offer a solution, and that the planned merger of Pension Credit and Housing Benefit from 2026 was an opportunity to implement this. The Minister acknowledged 87 that a taper could reduce the sense of unfairness associated with the ‘cliff edge’, but identified other factors that would need to be considered, such as complexity and incentive effects. (Conclusion, Paragraph 174)