- The government has revealed that from Winter 2025, all pensioners will receive the Winter Fuel Payment worth up to £300, but it will be clawed back from those with an income worth £35,000 or more through a tax adjustment
- Over three quarters of pensioners will now receive the payment – 9 million people compared to the 11.4 million who previously qualified before Labour came to power
- Government claims means-testing the Winter Fuel Payment will save the taxpayer £450 million, although Reeves originally hoped to save around £1.4 billion
- In one of their first moves since coming to power in July 2024, the Labour government removed the Winter Fuel Payment for all but the poorest of pensioners who receive Pension Credit
- Pension Credit claims since the July 2024 announcement are up 51% compared to the same period from 2023/24 (Source: Pension Credit applications and awards: May 2025 – GOV.UK)
Rachel Vahey, head of public policy at AJ Bell, comments:
“After 11 months, the government has finally bowed under political pressure to U-turn on its controversial policy to deprive millions of pensioners of their Winter Fuel Payments.
“But the route it has chosen is the most convoluted and difficult. It will pay out the benefit to every pensioner but then claim it back from 25% of them – those with an income of more than £35,0000 – through a tax adjustment. This not only creates tax chaos for over a million people but it creates a cottage industry for government to impose the clawback, creating additional admin which will cut into the estimated £450 million saving to taxpayers.
“The government originally hoped to save around £1.4 billion by restricting Winter Fuel to Pension Credit recipients only (see table), a measure it said was required in order to repair public finances. Some of that was always likely to be offset by the drive to ensure people claimed Pension Credit and, with a 58,800 increase in successful claims since the chancellor’s initial Winter Fuel announcement, the net saving from the whole exercise is likely to be miniscule.
“This farcical situation could lead to pensioner panic. Many will be scrabbling to make sure their income dips under the critical £35,000 limit. Given the chaos it could cause and the relatively tiny taxpayer savings on offer, it may have made sense for the government to take the political embarrassment of a U-turn on the chin and make the payment to all pensioners.”
How much the government originally expected to save:
Source: AJ Bell/HMT
