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The government department is now writing to 250,000 people it knows are entitled to pension credit pleading with them to claim the benefit.

Pension credit ensures that no pensioner aged 60 or over need live on less than £124.05 per week.

However, it is estimated that many over 60s are missing out on additional help because they mistakenly think having some savings or owning their home rules them out from getting pension credit to top up their income.

Mike O'Brian, pensions minister, said: "There are a lot of myths surrounding pension credit that need to be busted.

"It is vital that older people claim money that is rightfully theirs to help with their day-to-day needs."

The government is working in partnership with Age Concern, Help the Aged and local councils to encourage more people to claim.

Mervyn Kohler, special adviser for Help the Aged, said: "Help the Aged estimates that around £5bn-worth of benefits are left unclaimed each year - that money could make a huge difference to the living standards of pensioners everywhere, many of whom are really struggling with the soaring costs of basics, such as food and fuel.

She added: "Claiming pension credit before 6 October could lead to those older people who are eligible getting up to a year's backdated payment."

Gordon Lishman, director general of Age Concern, said: "With the rules on backdating of benefits changing in October, we would urge any older person struggling to make ends meet to make a claim now to ensure they do not lose out on cash that is rightfully theirs."

Alan Moore, of Glasgow-based IFA McCrea Financial Services, said: “As well as identifying the benefits they are entitled to, pensioners also need to make sure they are maximising their tax efficiencies and making their money work as hard possible for them.”