Winter fuel payment blow as 'extra 100,000 pensioners a year' to lose £300 benefit

More than 500,000 pensioners in certain financial circumstances will ‘miss out’ on winter fuel payments, new figures show. The Times reported that a decision to freeze the £35,000 income limit will mean people will be dragged into the tranche missing out.

Every year about 100,000 additional older people will lose their winter fuel payments as the new means test is frozen, according to expert analysis. Chancellor Rachel Reeves announced on Monday that the winter fuel payment worth up to £300, will be restored to the vast majority of pensioners who previously received it.

Those with an income above £35,000 will also receive the money, but it will then be reclaimed from them through the tax system. Sir Keir Starmer has insisted the decision to reinstate most winter fuel payments was not a response to the political backlash to the policy.

BBC moneybox expert Paul Lewis said: “The £35,000 income limit for keeping the winter fuel payment will be frozen Ministers confirm, leading to more pensioners repaying the money year by year https://bit.ly/3FHR40d it will join frozen bereavement payments, capital limits, child benefit limits, and tax thresholds.”

The Prime Minister pointed to recent growth figures and falling interest rates as proof that “the economy has stabilised”. Responding to the climbdown at Westminster, Lord Clarke of Nottingham said: “This is certainly a shambolic way of conducting a government, but otherwise, I find myself unfortunately rather out of step with the exchanges so far.

“The winter fuel payment had nothing to do with the level of fuel bills. It was paid to everybody, rich or poor, as a prize for reaching a certain age, which is why, at the last general election that I fought successfully as a candidate, the Conservative Party manifesto contained a commitment to abolish it. Unfortunately, we never got round to that.”

Officials say that about two million pensioners who have incomes of more than £35,000 will not get payments this year. However, they estimate that the policy will ultimately save £450 million a year compared with the universal system that was in place until last year.

Sir Steve Webb, the former pensions minister, who is now a partner at the pension consultants LCP, used official figures on the income and age breakdown of pensioners to estimate that the average pensioner earning more than £35,000 would lose about £175.

Government savings estimates therefore suggest that 2.5 million pensioners will not be getting the payments by the end of the decade. “The government’s own figures clearly suggest that they expect the number of losers from the new policy to rise each year,” Webb said. “With around two million pensioners currently over the £35,000 threshold, this number could easily rise by another half a million by 2030. This could end up being another way in which governments use inflation to quietly raise additional revenue year-by-year.”

After Ms Reeves initially linked winter fuel payments to pension credit, take-up of the benefit rose by almost 60,000, costing the Treasury more than £200 million extra each year. Webb added that given these higher costs “the net revenue from the policy is likely to end up barely a tenth of the amount banked by the chancellor when she presented her last budget”.

Ms Reeves acknowledged that working people were not feeling signs of progress as she sought to move on from the winter fuel row by insisting her spending review tomorrow would drive growth.

“This government is going for growth because that is the best way to create jobs, boost wages, lift people out of poverty and sustainably fund our schools and our hospitals and all the public services we rely on,” she told the GMB Union Congress conference.

While insisting that the government was “making progress”, Ms Reeves said: “I know that not enough working people are yet feeling that progress, and that’s what tomorrow’s spending review is all about — making working people better off, investing in our security, investing in our health, investing in our economy.”