Quick stats
£2.5bn Amount that went unclaimed in pension credit by eligible pensioners in the 2005-06 financial year, according to Age Concern
1.6million Number of pensioners who are entitled to claim pension credit to top up their cash but who fail to do so, estimated by the Commons Public Accounts Committee
£7,700 The average annual private pension income for a pensioner couple, according to the Office for National Statistics
Simple saver
Call the Pension Credit Helpline for free on 0800 991234 (part of the Department of Work and Pensions) to see if you're eligible for pension credit and, if so, apply. This credit comes in two parts - a "guarantee" credit that tops up your income if you're 60 or over, and a "savings" credit for those 65 or over who have other income or capital.
You'll qualify for the guarantee part if your overall weekly retirement income is less than £124.05 (£189.35 for couples); what you get will be the difference between what you're now on and these guarantees.
Your entitlement to the savings credit depends on how much you earn from your alternative sources - such as savings, private pensions and investments. If you earn between £91.20 and £174 a week (for couples the numbers are £145.80 and £255) overall from your state and private sources of income, then you'll qualify for a savings credit according to how much you take home.
The maximum you can get as a single person is £19.71 a week, while for couples the maximum is £23.13. More details and downloadable forms can be found at direct.gov.uk.
Advanced saving tips
1. Know what benefits you qualify for
If you qualify for pension credit, there's a whole host of other benefits for which you might qualify too, including housing benefit, council tax benefit, cold-weather payments and a community care grant. Your pension credit can also be boosted if you're a pensioner and you care at home for a spouse or relative; if you are severely disabled; or if you have exorbitant housing costs.
2. Plan your retirement early
Rather than relying late in life for pension credit, it is far better to plan for your retirement now.
The Association of Consulting Actuaries suggests that today's 25-year-olds ought to save 15% of their annual salary to guarantee a comfortable retirement. That might sound radical, given their likely debt hangovers from student days plus the desire to save up for a first home, but any spare income put into a pension will be worth its weight in gold. The longer you save, the more compound interest and returns will be able to build up and grow.
3. And use a calculator!
Free pension calculators can help you to get an idea of how much you need to save each month to begin building a decent pension pot for retirement. Start off with pensioncalculator.org.uk, moneymadeclear.fsa.gov.uk or bestinvest.co.uk.
To guide you, a £20,000-a-year pension demands that a 35-year-old today earning £30,000 needs to put aside a rather chunky 25.5% of their monthly salary until they retire at 65, according to the independent financial adviser Hargreaves Lansdown. This calculation also assumes that your company is making a contribution and that your fund grows, after charges, by roughly 6% every year. Overpay when you can to further boost the sums going into your coffers.
If all that sounds alarming, take heart from the fact that the tax relief on pension contributions (20% for basic earners, 40% for higher earners) is one of the most generous available to UK savers.
5. Retire late and reap some of the benefits
Work past your state pension age (which at present is 65 for men, 60 for women) and delay your claim to get a greater state payout. One option is to qualify for a deferred taxable lump sum (based on how many years you work past your retirement age) on top of your normal state pension. An individual entitled to a £100-a-week state pension at 65 who defers it for five years, could at present qualify for a £30,580 lump sum at 70 - although this might be taxable, depending on your pension status.
6. Use your spare income wisely
It's tempting to divert spare income into fun and frivolity, especially while you're enjoying being young, but it really pays to make the effort to put at least some of that income into saving for your old age outside of your pension scheme. Look at making regular payments into, say, individual savings accounts (Isas), cash savings or even investing in buy-to-let property. The crucial thing is to spread your money around lots of different assets in order to protect yourself if one asset falls.
Nice little earner
If you're fretting over how complicated the pension credit application might be - something that still prevents millions of pensioners from claiming - visit your Citizen's Advice Bureau (citizensadvice.org.uk).
A face-to-face meeting with a trained adviser will help take the stress out of the situation, and the adviser should be able to explain the thornier parts of eligibility.
Planet saver
A pension credit can help you qualify for a grant of up to £2,700 to heat your home more efficiently. Known as "Warm Front" in England (or the "Home Energy Efficiency Scheme" in Wales), it'll pay for insulation to stop your home losing heat and will help cut down on your bills.
