The government has revealed that from Winter 2025, all pensioners will receive the Winter Fuel Payment worth up to £300, but it will be clawed back from those with an income worth £35,000 or more through a tax adjustment.
Over three quarters of pensioners will now receive the payment – 9 million people compared to the 11.4 million who previously qualified before Labour came to power.
Government claims means-testing the Winter Fuel Payment will save the taxpayer £450 million, although Reeves originally hoped to save around £1.4 billion.
Sharing her reaction to today’s winter fuel payment announcement, Rachel Vahey, head of public policy at AJ Bell, said:
“After 11 months, the government has finally bowed under political pressure to U-turn on its controversial policy to deprive millions of pensioners of their Winter Fuel Payments.
“But the route it has chosen is the most convoluted and difficult. It will pay out the benefit to every pensioner but then claim it back from 25% of them – those with an income of more than £35,0000 – through a tax adjustment. This not only creates tax chaos for over a million people but it creates a cottage industry for government to impose the clawback, creating additional admin which will cut into the estimated £450 million saving to taxpayers.
“The government originally hoped to save around £1.4 billion by restricting Winter Fuel to Pension Credit recipients only (see table), a measure it said was required in order to repair public finances. Some of that was always likely to be offset by the drive to ensure people claimed Pension Credit and, with a 58,800 increase in successful claims since the chancellor’s initial Winter Fuel announcement, the net saving from the whole exercise is likely to be miniscule.
“This farcical situation could lead to pensioner panic. Many will be scrabbling to make sure their income dips under the critical £35,000 limit. Given the chaos it could cause and the relatively tiny taxpayer savings on offer, it may have made sense for the government to take the political embarrassment of a U-turn on the chin and make the payment to all pensioners.”
How much the government originally expected to save:
| Tax year | Estimated government saving |
| 2024/25 | £1,450,000,000 |
| 2025/26 | £1,510,000,000 |
| 2026/27 | £1,555,000,000 |
| 2027/28 | £1,580,000,000 |
| 2028/29 | £1,605,000,000 |
| 2029/30 | £1,655,000,000 |
Source: AJ Bell/HMT
Commenting on the announcement Sarah Pennells, Consumer Finance Specialist at Royal London said:
“This is good news for pensioners who don’t qualify for Pension Credit, and who therefore missed out on the Winter Fuel Payment last year. Even though energy costs are lower than they were a couple of years ago, paying bills over winter is a worry for many pensioners. The Winter Fuel Payment, of up to £300, can make a real difference to pensioners’ budgets.
“Even though there was a lot of publicity last year encouraging people to apply for Pension Credit, and therefore qualify for the Winter Fuel Payment, our research showed that three in ten people over State Pension age who were on a low income hadn’t checked to see if they were entitled to Pension Credit, while one in ten pensioners who had been told they qualified for Pension Credit hadn’t applied for it.
“The government aims to take back Winter Fuel Payment from pensioners with an income above £35,000 through the PAYE system or self-assessment, with pensioners who don’t want to receive the payment able to opt out altogether. However, if you have an income of less than £35,000 and want to receive the payment, don’t opt out, otherwise you could miss out on valuable support with energy costs.”
However, the Winter Fuel Payment change shouldn’t let wind out of the Pension Credit campaign’s sails warns Stephen Lowe, group communications director at retirement specialist Just Group, as he commented: “The take up of Pension Credit has been subject to severe scrutiny since the Government first limited the winter fuel payments to people who are in receipt of Pension Credit or certain other means-tested benefits.
“There has been a significant boost in take-up with more than 162,000 claims awarded since the means-testing of the winter fuel payment was introduced. This is a notable success that will see these low-income pensioner households receiving this much-needed financial support as well as unlocking the gateway to other valuable benefits, like the winter fuel payments and free TV license.
“Despite the Government confirming that eligibility for winter fuel payments will be widened, this should not distract attention from the important job of work to be done to increase the take up of Pension Credit. This benefit is specifically targeted at the poorest retirees, and it remains a concern that there are still hundreds of thousands of pensioners that are entitled to Pension Credit payments but not receiving it.
“Now is not the time to lose momentum on the good progress that has been made in making sure this important benefit reaches the remaining number of pensioners who are eligible for Pension Credit but not claiming.
“These people may be failing to claim for a number of reasons – they may simply be unaware of the benefit, not know how to claim or assume they are not eligible if they own their own home. Just’s research conducted this year among people aged over 66 found that four in 10 (40%) homeowners and one in seven (15%) of renters had never checked their benefit entitlement.
“The Government’s awareness drive is having a positive impact with the number of claims increasing noticeably, but there are people still missing out on this valuable help. If you think you, or a member of your family, may be entitled to Pension Credit there are a range of free resources to help check eligibility. The government website has links to useful third-party calculators (https://www.gov.uk/benefits-calculators) while other good sources are Citizens Advice, local councils and charities.”
