Government announces that three quarters of pensions will receive winter fuel payments

The Government has announced that more than three-quarters of pensioners will receive the winter fuel payment this year.

The change wil mean that around nine million pensioners with an income of, or below, £35,000 a year receiving the benefit. The threshold is well above the income level of pensioners in poverty and is broadly in line with average earnings, balancing support for lower income pensioners with fairness to the taxpayer

The Governments says the change will cost around £1.25 billion in England and Wales and see means-testing of the Winter Fuel Payment save around £450 million, subject to certification by the Office for Budget Responsibility (OBR) compared to the system of universal Winter Fuel Payments. The costs will be accounted for at the Budget and incorporated into the next OBR forecast. The Chancellor will take decisions on funding in the round at that forecast to ensure the government’s non-negotiable fiscal rules are met. This will not lead to permanent additional borrowing.

Pensioners will need to take any action as they will automatically receive the payment this winter, and for those with incomes above the threshold it will be automatically recovered via HMRC. The payment of £200 per household, or £300 per household where there is someone over 80, will be made automatically this winter. Over 12 million pensioners across the United Kingdom will also benefit from the Triple Lock, with their State Pension set to increase by up to £1,900 this parliament.

Chancellor of the Exchequer Rachel Reeves said “Targeting Winter Fuel Payments was a tough decision, but the right decision because of the inheritance we had been left by the previous government. It is also right that we continue to means-test this payment so that it is targeted and fair, rather than restoring eligibility to everyone including the wealthiest.

“But we have now acted to expand the eligibility of the Winter Fuel Payment so no pensioner on a lower income will miss out. This will mean over three quarters of pensioners receiving the payment in England and Wales later this winter.”

Alex Clegg, Economist at the Resolution Foundation, said “The new scheme for means-testing Winter Fuel Payments means that that the number of pensioners receiving support will rise from 1.3 million last winter to around 9 million this winter, and not far off the 11.6 million who received Winter Fuel Payments two winters ago when they were universal.

“But this U-turn doesn’t represent a return to the status quo. The new means-test will create new complexity in the tax system, including a cliff-edge for those with around £35,000 of income. The reported savings of £450 million will be reduced further by the cost of increased pension credit take-up as a result of the original policy, and the cost of administering the new means-test.

“The real question is why it is now a priority to pay Winter Fuel Payments to over three quarters of pensioners, with almost half of the new beneficiaries in the richest half of the population, when previously it was judged that only one-in-ten needed support.”

Caroline Abrahams CBE, Charity Director at Age UK said: “The Government’s Winter Fuel Payment announcement makes this a good day for older people.

“The decision to restore the Winter Fuel Payment to 9 million pensioners – all but those on the highest incomes who should be able to pay their heating bills without it – is the right thing to do and something that will bring some much-needed reassurance for older people and their families. At Age UK we heard from many through the winter who were so frightened about their bills that they didn’t even try to keep their homes adequately warm.”

“We have always said what really matters is that the estimated 2.5 million older people who lost their Winter Fuel Payment when they couldn’t afford it get the money back, by one means or another. These 2.5 million comprise older people entitled to Pension Credit but not claiming it; those whose small incomes take them just above the line; and a third group who face extremely high bills because of severe ill health or disability.

“This new policy will help all these people by restoring their Winter Fuel Payment and we welcome it as a result.

“Of course, we would much have preferred it had the Government taken this approach last summer but we are pleased it means that older people can look ahead to the coming winter with more confidence. This will be a huge relief to many of them and to us at Age UK too.”

“There’s certainly a lot more for us to do as a country to tackle the scourge of fuel poverty, something that impacts people of all ages, including too many families with children and disabled people of working age, among others, but today rights a wrong and marks a start. We hope the Government will build on it.

“We would like to express our gratitude to the hundreds of thousands of people who signed petitions, wrote to their MPs and took other action to encourage the Government to change course. You spoke, they listened.”

Independent Age Chief Executive Joanna Elson CBE said “We are pleased that the UK Government has listened to the voices of older people on a low income and reconsidered what was an incredibly damaging change to the Winter Fuel Payment. By widening the eligibility criteria, more older people in financial hardship will now receive this vital lifeline in time for winter.

“Our helpline receives thousands of calls from older people making drastic cutbacks just to get by and the changes to the Winter Fuel Payment made this worse. For millions living on low incomes, the entitlement supports them to turn their heating on and stock up on food during the colder months.

“While the changes to the Winter Fuel Payment are positive, they are not a silver bullet that will end pensioner poverty. Around 2 million older people still live in poverty, and measures must be taken to ensure the long-term financial security of all people in later life. There needs to be a cross-party consensus on the adequate income needed in later life to avoid financial hardship. Once this is established, every older person should be supported to receive this amount. Nobody should have to live in poverty as they age.”