Changes to Winter Fuel Payment eligibility rules

The Chancellor of the Exchequer, Rachel Reeves, has announced that, from winter 2024/2025, households in England and Wales will no longer be entitled to the Winter Fuel Payment unless they receive Pension Credit or certain other means-tested benefits. 10.8 million pensioners in 7.6 million households in England and Wales received the Winter Fuel Payment for winter 2023/2024. The Department for Work and Pensions (DWP) estimates that 1.5 million individuals in 1.3 million households in England and Wales will receive a payment for winter 2024/2025.

The measure is part of a package of measures announced by the Labour government aimed at making immediate savings, following an audit of public spending. It is expected to save around £1.3 billion in 2024/25 and £1.5 billion in subsequent years.

What is the Winter Fuel Payment?

The Winter Fuel Payment is an annual, tax-free lump sum payment intended to give older people reassurance they can afford to heat their homes in winter. It is paid to people who have reached State Pension age on or before the end of the qualifying week (the week beginning the third Monday of September each year) and meet certain other entitlement conditions, such as not being in receipt of free treatment in hospital for more than a year.

First introduced in 1997, the Winter Fuel Payment amounts have varied, but in most years the amount has been £200 for households where the oldest person is under 80, and £300 for households with someone aged 80 or over. In some years, extra amounts have been paid on top of the standard payments. For the winters 2022/2023 and 2023/2024, households received an additional Pensioner Cost of Living Payment worth £300 along with their Winter Fuel Payment. These payments are not being repeated for winter 2024/2025.

Around 11.6 million people in just over 8 million households in Great Britain were expected to receive a Winter Fuel Payment for winter 2023/2024, at a total cost of £2.0 billion. Pensioner Cost of Living Payments totalled a further £2.6 billion.

Commentary and debate on the Winter Fuel Payment

The main criticism of the Winter Fuel Payment since its introduction has been that, if viewed as a measure to reduce fuel poverty, it is poorly targeted. Different options for reforming the Winter Fuel Payment have been suggested, including means-testing the payment, linking the payment to existing means-tested benefits such as Pension Credit, introducing some mechanism for withdrawing it from higher income pensioners, or making it taxable.

Others argue that paying the Winter Fuel Payment as a universal benefit ensures that all those needing help with energy bills get support. Means-testing the Winter Fuel Payment would mean that those just above the threshold for benefits who might otherwise struggle to pay their bills would lose support. Campaigners also point out that many older people on very low incomes do not claim the means-tested benefits they are entitled to. The DWP estimates that around 880,000 households eligible for Pension Credit do not claim it.

Encouraging low-income households to claim Pension Credit

Alongside the Winter Fuel Payment announcement, the government said it would work with older people’s charities and local authorities to identify households eligible for Pension Credit but not claiming it. On 20 August 2024, the DWP announced a ‘Pension Credit awareness drive’ to encourage eligible households not receiving the benefit to apply for it by 21 December. This would allow more eligible households to receive backdated payments and qualify for the Winter Fuel Payment this year.

The government also intends to speed up plans to introduce a housing element in Pension Credit, to replace Housing Benefit for people above State Pension age.

How are the changes being implemented?

Regulations to restrict eligibility for the Winter Fuel Payment in England and Wales were laid before Parliament on 22 August 2024, and come into force on 16 September 2024. The regulations are subject to the negative procedure. A negative Statutory Instrument (SI) becomes law unless either the House of Commons or the House of Lords passes a motion within a specified period to annul (stop) it.

The DWP has not prepared a full impact assessment for the regulations because it says the changes will have “no significant new impact on business, charities or voluntary bodies.”

Why has the government made these changes?

The government states that the Winter Fuel payment changes, together with the other measures it announced in July 2024, are a necessary response to substantial pressures facing the public finances this year and next. It says the changes, while making the necessary Exchequer savings, will mean pensioner households on the lowest incomes still retain support.

The Chancellor of the Exchequer, Rachel Reeves, has said this was a “tough choice”, and not one she “wanted to make, or expected to make”. But, she argues, it will help put the public finances on a “firmer footing”. The government has also committed to retain the State Pension ‘triple lock’ for the duration of this parliament.

Response to the government’s announcement

Some commentators and pressure groups oppose outright the government’s decision to end the universal Winter Fuel Payment, highlighting continuing cost of living pressures on pensioners and the forthcoming increase in the energy price cap from 1 October. Withdrawing the Winter Fuel Payment from most pensioners would, they say, leave many facing a ‘heat or eat’ choice this winter.

Others question the mechanism the government has chosen to restrict eligibility for the Winter Fuel Payment. Basing eligibility on receipt of means-tested benefits creates a ‘cliff edge’ where people who just miss out on benefits lose support completely. Pensioners eligible for, but not claiming, Pension Credit would also lose the Winter Fuel Payment.

Welfare rights organisations question whether the DWP has sufficient staff to process an increase in claims resulting from its Pension Credit awareness campaign. They argue that the Winter Fuel Payment changes should be put on hold to allow time to consult on them, and that no changes should be made until Pension Credit take-up rates have increased significantly.

Some commentators argue the government should consider other options for reforming the Winter Fuel Payment. Suggestions include limiting payments to households on lower Council Tax bands, making the payment taxable, or only paying it to older pensioners. However, other options could be complex to administer, and save significantly less money than the government’s proposal.

The House of Lords Secondary Legislation Scrutiny Committee has said it is “unconvinced” by the government’s reasons for the urgency attached to laying the regulations. It says it seems the policy is being introduced at a pace that prevents appropriate scrutiny, particularly as the DWP’s explanatory memorandum lacks information about the expected impact of the policy change and because the Social Security Advisory Committee (SSAC) was not pre-consulted.

What is the situation in Scotland and Northern Ireland?

Winter Fuel Payments are devolved in Scotland and Northern Ireland.

The Scottish Government was going to introduce a new benefit – the Pension Age Winter Heating Payment (PAWHP) – to replace the UK Government’s Winter Fuel Payment on a “like for like” basis, starting from winter 2024/2025. Following the Chancellor’s announcement, the Scottish Government said that the resulting cut to its funding had left it with “no choice” and that it would follow the UK Government’s decision to restrict payments.

The Northern Ireland Executive has said that, despite its “deep concerns” about the Chancellor’s decision, it will also make equivalent changes to the Winter Fuel Payment in Northern Ireland. Executive ministers say diverging from the UK Government would require significant cuts to other public services.