Complex benefits system leaving 700,000 pensioners below the poverty line

Ministers admitted that 700,000 pensioners would be lifted over the poverty line at a stroke if they simply got all the help to which they are entitled.

Opposition MPs say many are put off claiming by the complexity of Gordon Brown's benefit system, which involves complicated forms and lengthy telephone applications.

Many old age pensioners are missing out on tax breaks and benefits due to a complicated and 'intrusive' benefits system

Six years ago, Mr Brown told the Labour Party conference: 'Our aim is to end pensioner poverty in our country.'

Yet the number of pensioners living in poverty rose by 300,000 last year - the first increase since Labour came to power.

The total of poor pensioners is now 2.8million.

The Government has also quietly dropped its target to increase the number of pensioners claiming pension credit.

Around half of all pensioners, including many with savings and investments, are entitled to money under the pension credit system. It is a top-up to the state pension and guarantees a weekly income of £124.05 for singles and £189.35 for couples.

Some 41 per cent of pensioners eligible for the credit - 1.8million - failed to claim last year, the figures show. On average, they missed out on £1,505.

The figures also reveal that council tax benefit was not claimed by 45 per cent of those eligible - 2.1million - who missed an average £701.

And 18 per cent of pensioners who can claim housing benefit - 350,000 - did not do so, leaving them worse off by an average £2,285.

To make the situation worse, pensioners will lose out on more than £100million next year under Government plans to curb backdated welfare payments.

Those who have failed to claim their full entitlement to pension credit - and associated housing and council tax benefit - will in future be entitled to just three months' worth of reimbursements rather than the current 12 months.

The move will save the Treasury £301million over the next two years.

Jenny Willott, MP for Swansea, uncovered the figures through Parliamentary questions

Liberal Democrat work and pensions spokesman Jenny Willott, who uncovered the figures with Parliamentary questions, said: 'The benefits system is so complex it is failing the very pensioners it is supposed to be helping.

'The system must be simplified to ensure poor pensioners get the cash they so desperately need.

'The Government must also stop dragging its heels and restore the link between the state pension and earnings immediately to ensure all pensioners are better off.'

Research by the charity Age Concern shows that six out of ten less well-off pensioners are put off claiming benefits by the complex system. Almost half find means testing too intrusive and 48 per cent are discouraged by complicated forms.

The Government insists meanstested benefits targeted at the poorest households have already lifted millions out of poverty - which is defined as having an income below 60 per cent of median income after housing costs.

But opposition MPs say means testing is 'demeaning', expensive to administer and acts as a disincentive to save.

Officials trawl through details of people's pensions, earnings, benefits and savings to work out whether they should receive top-ups.

Ministers have blamed council tax rises for this year's unexpected increase in the number of pensioners living in poverty.

Pensions Minister Mike O'Brien indicated it was one of the central reasons why more elderly people have fallen below the poverty line.

The average council tax bill has more than doubled since Labour came to power 1997.