Is the winter fuel payment coming back?

Last week prime minister Keir Starmer announced that there are plans to reintroduce the winter fuel payment for some people.  

It’s a partial reversal of the highly unpopular decision last summer to remove the payment from all pensioners except those claiming pension credit.  

Here we take a look at what those plans might look like, and how much it would cost.  

What’s on this page?

• Are winter fuel payments coming back?
• The removal of the winter fuel payment
• What might a return of the winter fuel payment look like?
• What’s the situation in Scotland and Northern Ireland?
• What could be the political fallout of a U-turn?

Are winter fuel payments coming back? 

The prime minister has said he will now look at the threshold at which people can claim the winter fuel payments to expand it away from the current position, where only the poorest (those claiming pension credit) are eligible.

At prime minister’s questions on 21 May, Starmer told MPs: “I recognise that people are still feeling the pressure of the cost-of-living crisis, including pensioners, as the economy improves. 

“We want to make sure people feel those improvements as their lives go forward. That is why we want to ensure that as we go forward, more pensioners are eligible for winter fuel payments.” 

“As the economy improves, we want to take measures that will impact on people’s lives, and therefore we will look at the threshold, but that will have to be part of the fiscal event,” he added. 

The next “fiscal event” is due to be the Budget in the autumn, usually held in late October or November. That wouldn’t give the government much time to reintroduce the winter fuel payments for winter 2025.

Speaking on Sunday 25 May, deputy prime minister Angela Rayner said she cannot guarantee the payment will be restored to pensioners in time for winter.  

However, she added she thought the prime minister may make an announcement sooner, on 11 June, when chancellor Rachel Reeves will deliver her first multi-year spending review. 

The removal of the winter fuel payment 

Until 2024, households with someone over the state pension age could receive a winter fuel payment worth £200 each year (or £300 for households with a member over age 80).  

All pensioners were eligible, regardless of their income or assets. 11.6 million pensioners in 8 million households in Great Britain received the payment at a total cost of £2.2 billion in 2023/24, the Institute of Fiscal Studies (IFS) calculated. 

Last July the government announced that winter fuel payment eligibility would be restricted to those who get pension credit – a benefit aimed at low income pensioners. The government said it needed to make immediate savings because of the state of public finances. 

Those eligible for pension credit need to have a total income, including the state pension and private pension income, below around £12,000 (for single pensioners) or £18,000 (for a couple) a year. One issue is that not all those entitled to pension credit actually claim it. The Department for Work and Pensions estimated that up to 760,000 eligible households were not claiming it in 2022/23.

The policy change meant the number of winter fuel payment recipients fell by almost 90%, to 1.5 million people in 1.3 million households in England and Wales. This saved the government around £1.5 billion a year, according to IFS calculations. 

The government’s removal of the payment only applied to England and Wales, since it’s a devolved matter in Scotland and Northern Ireland. But the Scottish government and Northern Ireland Executive followed suit, since they said cuts to their budgets meant they had no other choice. However they have both said they will make a £100 payment to pensioner households for winter 2025/26.  

What might the return of the winter fuel payment look like? 

The IFS has reviewed some of the potential options for the reintroduction of the winter fuel payment – and what they might cost the government. 

1. Return to everyone getting it 

Tom Waters, an associate director at the IFS who analysed the options, said the simplest option would be to just undo last summer’s policy and “return to giving winter fuel payment to all pensioners”. This would cost around £1.5 billion a year, increasing eligibility by about 11 million households.  

2. Return the payment to all, but higher income pensioners would repay it  

One option that has been put forwards is to give the payment to all pensioners, but those with a higher income would have to pay it back through a self-assessment tax return. This is similar to how child benefit works.  

Waters said: “As with child benefit, the most administratively straightforward way to do this would be to base the repayment on the income of the higher income member of the household (rather than their total income).” But, as Waters pointed out, there would be downsides – administrative costs and non-take-up. “It is time consuming for both taxpayers and the government to fill in and assess self-assessment tax returns,” he said. 

3. A new means-tested application process  

Another option is that households or individuals below a certain income could apply for winter fuel payments by reporting their income and other circumstances. This way the government could use a higher eligibility threshold than pension credit, as Starmer suggested in his comments to MPs.

“The hassle of applying would no doubt result in many not claiming, and would imply a lot of administrative cost for what is a fairly small benefit,” said Waters. 

Creating a new winter fuel payment threshold, set at 20% above the existing pension credit threshold, would cost around £100 million in extra fuel payments, and help around 400,000 more families, says the Resolution Foundation (a think-tank that focuses on improving living standards for those on low to middle incomes).

One way to simplify the application process could be to base the payment on individual income rather than households. Paying it to individuals would allow the government to do an individual-level means-test, based upon the individual’s income that the government already records for income tax purposes. But currently singles and couples get the same total amount of winter fuel payment – under this regime couples could get twice as much.

4. Make more people eligible for pension credit, and therefore for the winter fuel payment too

Another option is to change pension credit so that more people are eligible for both it and the winter fuel payment. There are different ways of doing this. 

Raising the pension credit threshold by 10% has been proposed by the Resolution Foundation. However, this change would cost £2.5 billion – more than the original policy saved – according to the think-tank’s calculations. That’s because it would increase the pension credit bill as well as the winter fuel payment bill. 

5. Widen eligibility to those receiving other means-tested benefits

The government could extend eligibility beyond pension credit, to pensioners that receive housing benefit or council tax support – both of which are means-tested benefits and so go to low-income households.

Adding in people who receive housing benefit would extend eligibility to 430,000 renting households (owner-occupiers are not eligible for housing benefit) at a cost of around £100 million a year, according to IFS calculations.

6. Allow disability benefits claimants to get winter fuel payment

Paying winter fuel payment to pensioners not on pension credit who get disability benefits would extend eligibility to 1.8 million households in England and Wales at a cost of roughly £500 million a year, according to IFS calculations.

This has been called for by Ruth Curtice, chief executive of the Resolution Foundation, who said: “A sensible way forward would be to extend support to pensioners receiving housing and disability benefits, as well as pension credit.”

But Waters said: “It would be somewhat more complicated in Scotland, where disability benefits are devolved [and] this would of course not specifically target low-income households.” 

7. Give winter fuel payments to pensioners in tax bands A-C

Calculations by Steve Webb, former pensions minister and partner at pension consultants LCP, have shown a little over half of pensioner households (6.3 million) live in a band A-C property. These tend to be lower income than those in higher banded properties, so allowing them to have winter fuel payments could help poorer pensioners. This solution has also been put forward by the financial commentator Martin Lewis.

But it’s not an ideal solution as there are plenty of low-income pensioners in more expensive houses, and vice versa. 

What’s the situation in Scotland and Northern Ireland? 

The Scottish Government and Northern Ireland Executive rely on funding from the Westminster government, and they said that funding cuts meant that they had no choice but to match the situation in England and Wales, removing the winter fuel payment from most pensioners.

However, from winter 2025/26, the Scottish Government is planning to introduce a £100 payment (called the pension age winter heating payment) for all pensioner households not receiving a qualifying benefit.

The Northern Ireland Executive is due to make a one-off payment of £100 to pensioner households this winter. 

If the winter fuel payment is reinstated for some or all pensioners in England and Wales, it seems very likely that that Scotland and Northern Ireland will follow suit. 

What could be the political fallout of a U-turn?

The government will hope it wins back pensioners as a result of a U-turn on the winter fuel payment eligibility. But Steve Webb is not convinced.

He said: “My feeling is that they are deluding themselves if they think a marginal increase in the cut-off point will win them any friends. The large majority of pensioners will still lose their winter fuel allowance, and people just the wrong side of the new cut-off will also feel aggrieved.”

In the meantime, it’s a waiting game. There might be an announcement in the June spending review, but it’s just as likely that we won’t know the outcome until the autumn Budget.