More than a million pensioner households across the UK are living in poverty because of the government’s failure to act on unpaid pension credit, according to the older people’s charity Independent Age.

Almost 2 million people aged 65 and over are living in poverty in the UK. Pension credit is the income-related benefit specifically designed to lift them out of poverty. But it is estimated that four in 10 pensioner households who are entitled to the help do not receive it.

Since the 2017 general election, the government has “benefited” from £7bn in unclaimed pension credit, the charity said. This figure will increase to more than £17bn by 2022.

“The recent decision to limit the TV licence to only those who receive pension credit adds insult to injury to over a million pensioners who between them, due to government inaction, are missing out on a staggering £10m every day that should be in their pockets,” said George McNamara, the charity’s director of policy and influencing.

Pension credit also opens up entitlement to other benefits, including housing benefit, free NHS dental treatment, and help with council tax, fuel bills and meeting the costs of a partner’s funeral.

Applying for pension credit is, however, a “very complex and intrusive process”, said McNamara, requiring detailed financial information which is not required for any other support. “The stress and pressure involved in providing this information – which can only be provided over the phone – acts as a major deterrent,” he said.

Another reason for the low take-up of the benefit, McNamara said, is that eligibility depends on changes in people’s circumstances over time. “The system isn’t designed to pick up on these changes – rather the onus is on the person, who may be living in vulnerable circumstances, to be aware of their new eligibility,” he said.

“There is also a stigma that exists around pension credit, as it is the only means-tested support for pensioners,” he added. “People shouldn’t have to jump through hoops to prove that they’re entitled to this basic safety net.”

The charity has commissioned surveys that found that out of 150 MPs, more than three in four supported change to the system. More than 80% of members of the public polled also agreed that it was the responsibility of the government to ensure that all older people who were entitled to pension credit were receiving it.

Independent Age’s analysis, based on data from the Department for Work and Pensions (DWP), found 1.3 million pensioner households are missing out on pension credit they are entitled to.

This includes 670,000 single women, at least 410,000 couples and up to 280,000 single men. There is no data to show the number of people living in care homes who are entitled to the benefit but not collecting.

Pensioners entitled to the benefit are missing out on an average of £49 a week, just under the average amount that the poorest fifth of pensioner couples spend on food and non-alcoholic drinks in a week. It can, said McNamara, make the difference between being isolated at home or being able to take part in social activities.

Eve, aged 79, lives in the West Midlands and receives pension credit. “I have had pension credit since I’ve been a pensioner,” she said. “I worked all my life but must have paid a smaller stamp because my income was so low when I got my state pension.

“My pension credit increased my pension by about £50. I couldn’t believe it made such a difference – it affects everything, you don’t have to worry about bills so much, you don’t have to worry about food so much, and it improves your whole quality of life.”

As part of its Credit Where It’s Due campaign, launched on Wednesday, the charity wants the government to commit to a 75% take-up target by 2020. The charity said this would lift 500,000 older people out of poverty and put an additional £1.25bn into the pockets of the poorest pensioners. It is also calling for an action plan to make the necessary changes to increase the number of pensioners who benefit.

A DWP spokesperson said: “Pensioner poverty rates have fallen dramatically in recent years [and] relative pensioner poverty rates have halved since 1990. We want to maintain this achievement.

“We want everyone to claim what they are entitled to. Everyone who claims their state pension receives a letter which encourages them to contact us directly over the phone to discuss their pension credit entitlement.”