7 days ago
How much has soaring take-up of pension credit eaten into Winter Fuel Payment savings?
Pension credit claims have soared as poorer pensioners try to hang on to their Winter Fuel Payments, eating into savings the Government hoped to make, This is Money analysis shows.
Some 58,800 extra pension credit claims have been awarded since means-testing of the annual payment, worth up to £300 per household, was announced last summer.
That represents a 57 per cent jump to 162,800 successful claims between last July and the end of May.
Pension credit tops up weekly income to a minimum of £227.10 for single people and £346.60 for couples - and is worth £4,000 on average a year to those eligible.
Extra claims therefore will have cost the Treasury around £235million, versus projected savings of £1.3billion from restricting Winter Fuel Payments in the first year, and £1.5billion in subsequent years.
However, this sharp increase in claims was actively encouraged by the Government, which has tried to drive up pension credit applications.
So, it is likely to have been anticipated and factored into the sums to some extent.
The Government has now U-turned on its scrapping of Winter Fuel Payments for most pensioners, and said more will be made eligible.
MPs grilled Pensions Minister Torsten Bell on how this will be achieved when he appeared before the work and pensions committee on Wednesday morning.
The committee put out a statement in advance of the hearing about the restriction of formerly universal Winter Fuel Payment to those in receipt of pension credit.
It said: 'Following a backlash against the move, the Prime Minister announced that he would make more people eligible this winter, without saying how many or how.
'Bell will be questioned on how the Government is tackling poverty in retirement, including around pension credit.
'In previous sessions, the committee has heard how many pensioners are having to tighten their belts as a result of the increased cost of living and the support cliff-edge experienced by those who are just above the pension credit threshold and consequently miss out on thousands of pounds in income support.'
If you are elderly and not well off, pension credit tops up weekly income and also opens the door to a lot of additional help with household bills.
You can gain many further thousands of pounds, including help with housing costs, heating, council tax, TV licences if you are over 75, and other bills.
> Claiming pension credit: Find out how to top up your weekly income
Morgan Vine, director of policy at charity Independent Age, says: 'While this increase in pension credit recipients is a positive step, it is sadly still a drop in the ocean compared to the latest pension credit take-up figures which show there are almost a million eligible older people not receiving this entitlement.'
She is urging the Government to introduce a take-up strategy that targets those on very low incomes and in need of support, and notes the latest claim figures reveal a large number of unsuccessful applications.
'There is a real person behind each application that made the decision to seek out financial support,' says Vine.
'In many cases, they will be living on a low income but sitting just above the pension credit threshold by only a few pounds.
'The older people we speak to in this situation have been forced into making drastic cutbacks just to get by.
'We have heard terrible accounts of people not washing to save on water, having one small meal a day and avoiding meeting up with loved ones as they cannot afford to buy a hot drink in a cafe. This cannot be allowed to continue.'
Tom Selby, director of public policy at AJ Bell, says: 'The furore over Rachel Reeves' decision to scrap the Winter Fuel Payment for all but the lowest income pensioners has created a political nightmare for the Government, with the issue repeatedly raised on the doorstep during the local elections and seized upon by Labour's opponents.
'What's more, the dramatic rise in pension credit applications following the change will eat into the already limited savings the Chancellor expected to make from the policy.'
He says at the time of the Winter Fuel Payment announcement, the Government said it wanted to ensure pension credit was being claimed by every eligible pensioner, with estimates suggesting around 800,000 were failing to claim the benefit.
Selby adds: 'The Government would surely argue that boosting pension credit uptake is a worthy outcome anyway, regardless of the Winter Fuel Payment issue.'
Jon Greer, head of retirement policy at Quilter, says: 'Pension credit has been a perennially underclaimed benefit.
'But the Government's decision to means test the Winter Fuel Payment has clearly kicked many into action to start claiming it in order to receive the highly prized payment.'
Greer says the surge in applicants may have left many disappointed as 146,000 claims were not awarded between last July and the end of May, a 99 per cent increase on the year before.
Meanwhile, he says the increase is also having a huge impact on the systems used by the Government to assess claims
'Our recent freedom of information request found that pension credit application processing times peaked at 87 working days in December 2024, significantly above the Department for Work and Pensions' 50-working-day target.
'If we are to make the drive to get people on the correct benefits, we must not be leaving them in limbo for that long.'
Greer adds recent figures show the DWP has reduced the pension credit backlog from 85,500 at its peak in December 2024 to 10,800 in mid-May.
Stephen Lowe, a director at Just Group, says of the boost in pension credit take-up: 'This is a significant 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.'
But he says there is an important job to be done to increase the take up of pension credit.
'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.
Lowe urges people who might qualify, or their family members, to use the Government's calculator to check eligibility, or contact charities or their local council for help.
