As many as 1.6 million pensioners in the UK are not claiming all of the pensions credits to which they are entitled, a new report suggests.

According to the Commons Public Accounts Committee, the Department for Work and Pensions has not met its target to pay the credit to three million households by 2006, despite its introduction by chancellor Gordon Brown in 2003.

It is estimated that between £1.5 billion and £2.1 billion of funds allocated for pension credit lay unclaimed in Treasury funds.

The lowest take-up was demonstrated by the older, richer, more rural and ethnic minority sectors of the over-65 population.

Committee chairman Edward Leigh commented: "Billions of pounds are still lying unclaimed in the Treasury. A far better place for them would be in pensioners' pockets."

"Many pensioners suffer from privation and new and imaginative thinking is needed to encourage them to claim the benefits that can make a big difference to their quality of life," he continued.

Pension credit is intended to guarantee everyone aged over 60 an income of at least £119.05 per week, or £181.70 per week for those with partners.