In a written response to a question from the Liberal Democrats, the government has admitted that four million people will be able to claim the credit but ministers only expect three million people to do so.

The Pension Credit has been designed to lift older people out of poverty by guaranteeing a minimum income and topping-up meagre pension savings.

Any shortfall in claimants could blow a hole in the government strategy but, on the flip side, leave money in treasury coffers at a time when public finances are under pressure.

Guarantee

The Pension Credit will be introduced on 6 October 2003 and will replace the Minimum Income Guarantee (Mig).

It will extend means testing to up to half of all pensioners.

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The credit has two elements: The Guarantee Credit and Savings Credit.

The Guarantee Credit can be claimed by pensioners who are 60 or over, while the Savings Credit can only be claimed by pensioners who are 65 or over.

The Savings Credit has been created to reward pensioners who have a second pension or modest savings, and is worth up to a maximum of �13.80 a week for single pensioners and up to �18.60 a week for couples.

Lamentable

In April, the Public Accounts Committee urged the government to improve the take-up of means-tested benefit.

As a result, almost �2bn of pensioner benefits remains unclaimed, a state of affairs chairman of the committee Mr Edward Leigh MP described as "lamentable".

The committee said it had repeatedly expressed concerns about the Department for Work and Pension's computer systems and the impact of their weaknesses on customer service.

More recently, the government has come under fire for a host of problems associated with the introduction of the new Child Tax Credit on April 6.