Commentary on Sections Sections 1 to 4: Entitlement and amount Section 3: Savings credit
70.Section 3 specifies the conditions that must be satisfied (in addition to the two "common conditions" described in connection with section 1) if the claimant is to be entitled to savings credit (subsections (1) and (2)).  It then goes on to explain the calculation for determining the amount of savings credit to which a claimant is entitled (subsections (3) and (4)).
71.The condition of entitlement in subsection (1) is that the claimant has attained the age of 65 or is a member of a couple the other member of which has attained the age of 65.
72.The condition in subsection (2) has two parts, each concerned with aspects of the claimant's income.
73.The first part (paragraph (a)) requires that the claimant has what is referred to as "qualifying income" of an amount that exceeds a figure referred to as "the savings credit threshold".
74."Qualifying income" is addressed by subsection (6), which confers power to make provision by regulations as to income which will or will not be "qualifying income". The intention is that the claimant's "qualifying income" will, broadly, be those parts of the claimant's income which arise from:
	contributing to the National Insurance system (for example, a Category A or Category B retirement pension, including additional pension);
	the claimant's own retirement provision (for example, an occupational or personal pension, or income from capital);
	earnings.
75.The "savings credit threshold" is a prescribed amount (see the definition in subsection (7)).  The amount prescribed is expected to be around £77 in 2003 for a single person and £123 in the case of a couple.
76.Savings credit is, however, to be subject to a maximum entitlement, referred to as "the maximum savings credit" (defined in subsection (7)), which is a prescribed percentage (the intention is that it will be 60 per cent) of the difference between:
77.The maximum savings credit is therefore expected to be around:
	£13.80 in the case of a single person (60 per cent of the difference between £100 and £77); and,
	£18.60 in the case of a couple (60 per cent of the difference between £154 and £123).
78.If the claimant has income in excess of the appropriate minimum guarantee, the savings credit will be adjusted by deducting a prescribed percentage (the intention is that it will be 40 per cent) of the amount by which the claimant's income exceeds the appropriate minimum guarantee.
79.The effect, based on estimates for 2003, is that normally the savings credit is reduced to nil in the case of a single person if the claimant's income is £135 or more and in the case of a couple if the claimant's income is £201 or more.
80.The second part of the condition of entitlement in subsection (2) (paragraph (b)) reflects the provision for reducing the amount of savings credit in circumstances where the claimant has income in excess of the appropriate minimum guarantee. The section provides that there is no entitlement to savings credit where the claimant's income is such that the adjustment has the effect of reducing the savings credit to such an extent that none is payable. The same calculation therefore serves to determine both entitlement to, and the amount of, savings credit.
81.Subsections (2)(b) and (3) together produce the above results by providing that the amount of the savings credit to which a claimant is entitled is the amount by which "amount A" exceeds "amount B" (subsection (3)) and that there must be such an excess if the claimant is to be entitled to savings credit (subsection (2)(b)).
82.Amount A and amount B are defined in subsection (4), but to find their amount involves some further calculation. The following amounts (all of which have been described either in the Notes on section 2 or in the preceding Notes on this section) must be found in the case of the claimant:
83.From those amounts two further amounts that need to be known can be calculated:
84.Subsection (4) defines "amount A” and “amount B”.
85.Amount A will always be amount (7), unless that amount exceeds the maximum savings credit, in which case amount A will be the maximum savings credit.
86.Amount B will be amount (8) in any case where the claimant's income exceeds the appropriate minimum guarantee. In any other case, amount B will be nil (and the amount of savings credit to which the claimant is entitled will accordingly be amount A without any reduction).
87.Section 2(6) makes provision for a prescribed amount to be substituted for the reference to the standard minimum guarantee in section 2(3)(a). Where that happens, the claimant's appropriate minimum guarantee will normally be less than if it included the standard minimum guarantee instead of the prescribed amount substituted for it.
88.That has consequences for the calculation of amount B. Where the standard minimum guarantee is replaced by virtue of section 2(6), a smaller amount of income will be sufficient to exceed the appropriate minimum guarantee and bring the adjusted amount B into operation.
89.It is not, however, intended that, simply because of the application of regulations under section 2(6), the claimant's savings credit should necessarily be subject to that extra degree of adjustment in all cases where those regulations apply, so subsection (5) confers power by regulations to substitute for the appropriate minimum guarantee a prescribed higher amount, but only for the purpose of finding the amount (8) described above.
90.The effect of such a substitution is that the amount (8) described above, and accordingly amount B, will be less than it would otherwise be, or will become nil, and so a smaller amount B falls to be set against amount A.
91.Subsection (8) confers the power to prescribe nil as an amount.  This will be exercised to substitute “nil” for the reference to the maximum savings credit in cases corresponding to those in paragraphs 7 and 8 of Schedule 7 to the Income Support (General) Regulations 1987 where a nil amount is prescribed.
92.That Schedule prevents prisoners, and members of religious orders who are fully maintained by their order, from receiving Income Support. See also paragraph 56 above.
93.Annex C to these Notes contains worked examples of the operation of the rules for determining the amount of a claimant's savings credit.