A new Institute of Fiscal Studies (IFS) briefing has been published which considers the options for how to expand entitlement to winter fuel payment in the UK.
The government previously chose to restrict eligibility to only those receiving pension credit. It could choose to restrict eligibility based on the receipt of other benefits, such as housing benefit and disability benefits. Unless it wants to create a whole new administrative system, the only other option for means-testing WFP is to do it through the income tax system.
This IFS briefing considers how many pensioner households would be (in)eligible given different income thresholds, and how much would be saved compared with returning to universal entitlement for pensioners. The key issue that the government faces is that if they introduce a means-test which only keeps high-income pensioners ineligible, then they save relatively little for the exchequer compared to returning to universal entitlement (for example, saving around £200 million per year if the threshold is set at the income tax higher rate threshold). But there would be significant administrative and hassle costs of such a system.
Jonathan Cribb, Associate Director at IFS, said:
“If the government wants to re-extend entitlement to winter fuel payment to many pensioners, but still prevent it being paid to high-income pensioners, they will end up making only small savings compared to returning to universal entitlement. Those small savings would need to be balanced against the administrative and hassle costs (for government and for pensioners) of operationalising and interacting with a new means-test.”
