Winter fuel payment U-turn: bad news for single pensioners

Times

16 hours ago

About 600,000 single pensioners will lose their winter fuel payment this year in what experts have called the 'latest instance of the singles tax'.
After last year scrapping the universal payment, worth up to £300 and previously paid to all pensioner households, the government announced a U-turn that will mean those with incomes below £35,000 will get the allowance this winter.
Under the new rules, about 9 million pensioners are expected to get the winter fuel payment, up from 1.5 million last year when it was limited to those who claimed pension credit or certain other benefits.
But while the payment is per household, eligibility is based on individual income. That means a couple with a combined income of £69,000 would still get the payment, while a single pensioner earning £35,000 would not.
Couples where one partner earns more than £35,000 will get to keep half or two-thirds of the money, because of the way the scheme is administered.
The average annual income of a pensioner couple was £49,036 in 2023-24, according to the Office for National Statistics. Between 2021 and 2024 it was highest in the southeast of England, at £59,748, and lowest in the northwest at £41,704.
On average, a single female pensioner earned £22,516 and a single male pensioner £25,480. But while the income of a single pensioner is typically about half that of a couple, their energy bill is not.
A single-pensioner household spent about £1,352 a year on gas and electricity in 2022-23, according to the Office for National Statistics, while a pensioner couple spent £1,669 — about 23 per cent more.
This means that before the winter fuel payment is factored in, a typical single female pensioner spends about 6 per cent of her gross income on energy and a single male pensioner 5.3 per cent, compared with 3.4 per cent for a pensioner couple.
Sarah Coles from the wealth manager Hargreaves Lansdown said: 'Just because you live alone, it doesn't mean your bills are halved. This is yet another example of the dreaded singles tax, which we also see with broadband and food bills.'
• What is the winter fuel payment and who will get it in 2025?
Who gets what
Under the latest winter fuel payment rules, couples living together get £100 each. If one partner earns more than £35,000, they will share the £200 payment, but half of it will be recouped from the higher earner by HMRC, the Department for Work and Pensions (DWP) said. This means they end up with £100 between them.
The money will either be deducted through a self-assessment tax return, or automatically through pay as you earn (PAYE), for those who are still working, or who have a company pension or annuity.
It's not just earnings that affect how much you get — age does too. If one partner in a couple is over 80, they get £200, and their partner £100. If the person aged over 80 is a lower-earner and their partner earns more than £35,000, the couple keep £200 of the £300 allowance. But if they earn more than £35,000, they keep £100. If both partners are over 80 and earn less than £35,000, they receive the full £300.
About 2 million pensioners will still be ineligible for the payment. The pension consultancy Lane Clark & Peacock estimates that 660,000 of these are single pensioners.
Sir Steve Webb, from the firm, expects the number of ineligible pensioners to grow by another 500,000 within the next five years if the £35,000 threshold is frozen.
Other crucial thresholds, including the points at which people start to pay income tax (£12,570) and higher-rate tax (£50,270) have been frozen until at least April 2028.
But the government has pledged to maintain the triple lock, which guarantees that the state pension rises each year in line with the higher of 2.5 per cent, wages or the consumer price index measure of inflation. The new state pension for those who reached state pension age after April 2016 is £11,973 a year.
If state pension keeps rising but the winter fuel payment threshold does not, more pensioners will find themselves ineligible for the benefit.
The pensions minister Torsten Bell said £35,000 was 'a round number, and we do not intend to change it in the years ahead'. He added: 'Further in the future, yes, there will be questions about uprating, which will be considered in the normal way.'
Bereaved pensioners who inherit their spouse's pension income are also at risk of losing their winter fuel payment in the future. This is likely to affect those who inherit an annuity or older defined benefit pension, which may include death benefits that pay a reduced income to the surviving spouse.
Coles said: 'If the partner with the larger pension dies, half of their pension income might go to their spouse. They might then have over £35,000 in pension income and so lose their winter fuel allowance, despite being worse off overall.
'It's easy to assume that inheriting half of someone's pension will mean you can cover your costs, but your bills won't halve when you're living alone, so you need to have a financial plan in place for this phase of retirement. And that plan needs to factor in the loss of your winter fuel payment too.'
Should you claim pension credit?
The DWP has estimated that about 65 per cent of those entitled to pension credit claimed it in 2022-23, so there could still be tens of thousands of pensioners missing out on what can be a useful benefit.
Pension credit, paid to about 1.36 million households, aims to help cover the living costs for those who are over state pension age and have a low income, by topping up their state pension to £227.10 a week for a single person.
It also entitles people to other benefits such as the warm homes discount of £150, which is taken off your electricity bill, or the cold weather payment, worth £25 and paid if the average temperature in your area is recorded as, or forecast to be, 0C or below over seven consecutive days.
You can normally claim pension credit if you have a single income of less than £227.10 a week or a joint income of less than £346.60, based on income from the state and personal pensions plus any earnings. Pension credit will then normally top up your income to this threshold. For every £500 you have in savings above £10,000, you lose £1 of your entitlement to pension credit.