Pounds I applied to allowance (7)
I believe the answer is:
pension
'to allowance' is the definition.
(thesaurus)
'pounds i applied' is the wordplay.
'pounds' becomes 'pens'.
'applied' becomes 'on'.
'pens'+'i'+'on'='PENSION'
(Other definitions for pension that I've seen before include "Retirement allowance" , "Payment to traitor" , "Retired person's income" , "Retirement pay in a Continental boarding-house" , "Nice little hotel" .)