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ALMOST two million pensioners are facing a cruel trap that threatens to deprive them of the biggest ever rise in the state pension and vital elderly benefits.

Savage cuts to Pension Credit for pensioners who saved for their retirement have all but wiped out what Chancellor George Osborne boasted was the ‘largestever cash increase’ in the state pension, which takes effect this week.

And the cuts risk barring hundreds of thousands of pensioners from vital discounts, council tax and housing benefit, cold weather payments, and help with heating costs from energy suppliers.

The change has come as a shock to many pensioners who received the news in letters from the Department for Work and Pensions revealing their state pension for the new tax year.

It comes just a fortnight after the Chancellor announced changes to pensioners’ tax allowances — the so-called ‘granny tax’ — which could leave pensioners on incomes of little more than £11,000 a year £323 worse off.

Michelle Mitchell, director-general of charity Age UK, says: ‘It is unfair that older people on low incomes are having their benefits reduced.

‘The Treasury is giving with one hand and then immediately taking with the other.’

The crucial change to Pension Credit was announced in Mr Osborne’s pre-budget report late last year.

Pension Credit has two elements: Guarantee Credit, which tops-up your income; and Savings Credit, which rewards people who saved for retirement.

Guarantee Credit is claimed by the very poorest pensioners. The government calculates how much income the elderly get from their state pension, private pension and savings of more than £10,000.

Currently, Guarantee Credit promises to top up their pension, so single pensioners have an income of at least £137.35 a week and couples get £209.70 a week.

Pensioners with an income of at least £103.15 a week (£164.55 for couples) can receive Savings Credit as a ‘reward’ for saving. This can pay up to £20.52 a week for a single pensioner and £27.09 for a couple on top of the basic state pension of £102.15 and any Guarantee Credit. Increases to Guarantee Credit are usually linked to average annual increases in earnings, meaning the rise from April would normally have been 2.8 pc. However, in November the Chancellor gave an extra boost to Guarantee Credit and increased it by 3.9 pc. This means from next week Guarantee Credit will pay out at least £142.70 a week (£217.90 for couples).

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