Steve Webb: Over 100,000 people set to be thrown off the ‘Winter Fuel Payment Rollercoaster’ next year because of frozen £35,000 threshold

The increase in the state pension and other pensions next April will take more than 100,000 people over the £35,000 cut-off point for Winter Fuel Payments next year, resulting in them losing their payments, according to new analysis from LCP.   A similar effect is likely to be seen for each year that the £35,000 threshold remains frozen and could result in up to half a million pensioners losing their Winter Fuel Payments in the next four years.

As a result, these people who received a WFP up to 2023, lost it in 2024 when it was means-tested, got it back again in 2025 when it was restored for those under £35,000, will lose it again in 2026 (or later years).  This is because Ministers have said that the £35,000 cut-off is to be frozen (see notes to editors), whereas state pensions and other income will generally rise each year.

The table below shows how someone on an income of £33,600 in 2025/26 (and hence currently entitled to a WFP) could lose it in 2026/27 purely because of inflation-linked increases in pensions.

In this example the individual:

–          Receives the standard rate of new state pension

–          Receives a company pension which makes their total annual income £33,600;

–          Sees their state pension go up by 4.7% in April 2026, in line with the ‘triple lock’

–          Sees their company pension go up in line with inflation, assumed to be 4% in the year to September based on the Bank of England’s latest forecast;

The table below shows that the combined increase in the state pension and company pension gives the individual a total income of £35,027 in 2026/27 which means they will lose up to £300 in Winter Fuel Payment depending on their age.

Analysis of data on pensioner incomes suggests that over 100,000 pensioners could be in this band of incomes, being under £35,000 this year but potentially taken over by inflation-linked increases next year.

Commenting, Steve Webb, partner at LCP said:

“The new £35,000 cut-off for Winter Fuel Payments is set to be frozen for years to come, meaning that the policy will bite progressively harder as inflation-linked increases in other pensions cause people to cross the £35,000 line.  Given that inflation-linked increases are simply designed to maintain people’s standard of living, it is hard to see why they should be treated as making people “better off” and hence less deserving of a Winter Fuel Payment.  People who cross the line in the coming years will have experienced a Winter Fuel Payment ‘rollercoaster’, first having it taken away, then given back and now lost again.  Such constant changes do little to help people manage their finances in retirement”.