Winter fuel payment: Options to reintroduce the benefit for millions of households
Winter fuel payment: Options to reintroduce the benefit for millions of households
The decision to make the Winter Fuel Payment available only to those who claim pension credit last year meant those claiming the benefit fell by almost 90% and saved around £1.5 billion a year, the Institute for Fiscal Studies (IFS) estimates
An update on Winter Fuel Payments is likely within the next few weeks
(Image: undefined via Getty Images )
Plans on whether to restore Winter Fuel Payments for more pensioners could be unveiled as early as next month, Angela Rayner recently hinted. The Deputy Prime Minister said an update may be likely in the Spending Review, scheduled for June 11.
In a highly controversial move the Labour UK Government previously limited the annual payment of up to £300 to only those receiving certain means-tested benefits, such as Pension Credit or Universal Credit. It was in an effort to address a £22 billion 'black hole' in the public purse. However, with the UK's economic prospects improving, Sir Keir Starmer expressed his desire to reinstate the payments to "more pensioners" at the next "fiscal event".
Below we have outlined a number of possible outcomes that could be announced on June 11 to help you know what to expect. These include anything from a full reversal to expanding entitlement to recipients of certain benefits. For money-saving tips, sign up to our Money newsletter here .
Full reversal
One option on the table could be to completely overturn the move that removed the benefit from countless pensioners
Taking back the decision to restrict it to only those who are eligible for pension credit the previous year resulted in a nearly 90% drop in those claiming Winter Fuel Payment and led to an annual saving of roughly £1.5 billion, according to the estimations by the Institute for Fiscal Studies (IFS).
Reinstating the policy change from last year would extend eligibility to an additional 11 million households and naturally erase the £1.5 billion in savings.
Introduce a designated threshold for Winter Fuel Payments
Introducing a bespoke threshold and means-testing system would offer an avenue for households that don't qualify for Pension Credit to request Winter Fuel Payments.
Lifting the bar 20% higher than the Pension Credit limit would bring about an expenditure of nearly £100 million and make payments accessible to about 400,000 extra families, as per the data from the Resolution Foundation.
An alternative approach could take inspiration from Child Benefit by letting all pensioner households apply, but then necessitating those with income above a specific tier to reimburse some amount through a self-assessment tax return, notes the IFS.
However, Tom Waters, associate director at the IFS, has flagged concerns regarding the adoption of "a clunky bureaucratic mechanism for what is, ultimately, a relatively small payment".
The Institute for Fiscal Studies (IFS) has estimated that restricting Winter Fuel Payment to only those on pension credit last year led to a nearly 90 per cent drop in claimants, saving about £1.5 billion annually.
Reversing the policy change from last year would make an additional 11 million households eligible, effectively erasing the £1.5 billion saved.
Introduce a specific income threshold for Winter Fuel Payments
Implementing a new income threshold and means test could enable households not receiving Pension Credit to qualify for Winter Fuel Payments.
An increase of 20 per cent above the Pension Credit limit could incur a cost of approximately £100 million, extending benefits to roughly 400,000 more families, as per the Resolution Foundation's analysis.
One approach could mirror Child Benefit, allowing all pensioner households to claim, but then requiring higher-income recipients to repay some through a self-assessment tax return, as noted by the IFS.
However, IFS associate director Tom Waters cautions against the potential pitfalls of "a clunky bureaucratic mechanism for what is, ultimately, a relatively small payment".
Widen eligibility to include recipients of disability or housing benefits
Expanding eligibility to include those receiving disability benefits could benefit around 1.8 million additional households, with an estimated annual cost of £500 million, according to the IFS.
Expanding the Winter Fuel Payment to cover those receiving housing and disability benefits could benefit an additional 1.3 million pensioner households, with an annual cost of £300 million, according to the Resolution Foundation's calculations.
Ruth Curtice, the chief executive, described this move as an "affordable" and "sensible way forward".
Pay Winter Fuel Payments to individuals, not households
Currently, the Winter Fuel Payment is issued per household rather than per individual, which presents a challenge in its distribution.
A shift to individual allocation would enable the UK Government to perform means testing on a personal level, utilising existing income tax data.
Article continues below
This change would allow low-income pensioners with wealthier partners to receive the winter fuel payment.
However, this adjustment might result in couples receiving double the amount compared to single individuals, whereas currently, a single person receives the same as a couple in one household.
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