All pensioners with an income of up to £35,000 will receive the Winter Fuel payment this year, after the Government U-turned on its unpopular decision to axe the benefit for most older people.
The reversal means 9million pensioners – more than three quarters of those living in England and Wales – will get the payment worth up to £300 this winter.
The Government said support will continue to be targeted, with pensioners above the new income threshold having the money automatically recovered – or they can simply opt out.
‘No pensioner will need to take any action as they will automatically receive the payment this winter, and for those with incomes above the threshold it will be automatically recovered via HMRC,’ it says.
Last summer, it scrapped the benefit for some 10million people, and gave it only to those qualify for pension credit or certain other benefits.
Pension credit tops up people’s annual income to a minimum of around £11,800 a year at the current rate, which marks a significant expansion in those who will be eligible for the Winter Fuel Payment again starting this autumn.
Winter Fuel Payment: Nine million pensioners will receive it this year
The Government says the new £35,000 threshold is well above the income level of pensioners in poverty and broadly in line with average earnings, which will balance support for lower income pensioners with fairness to the taxpayer.
The fix will cost around £1.25billion in England and Wales, and slash the savings from means-testing the benefit to around £450 million.
Last year’s clampdown on who could claim the Winter Fuel Payment was projected to save £1.3billion in the first year, and £1.5billion in subsequent years.
However, soaring pension credit claims as poorer pensioners try to hang on to their Winter Fuel Payments are likely to have eaten into savings the Government hoped to make.
The Treasury said today the Chancellor will take decisions on funding to ensure the its fiscal rules are met, and the decision will not lead to permanent additional borrowing.
It added the payment of £200 per household, or £300 per household where there is someone over 80, will be made automatically.
Around 2million individuals in England and Wales over state pension age are estimated to currently have a taxable income above £35,000.
‘Pensioners above the £35,000 threshold will have the full amount of the Winter Fuel Payment they received automatically collected via PAYE, or via their Self-Assessment return,’ says the Treasury announcement.
‘No one will need to register with HMRC for this or take any further action.
‘Pensioners who want to opt out and not receive the payment at all, will be able to do so, with details to be confirmed.’
Chancellor Rachel Reeves said: ‘Targeting Winter Fuel Payments was a tough decision, but the right decision because of the inheritance we had been left by the previous government.
‘It is also right that we continue to means-test this payment so that it is targeted and fair, rather than restoring eligibility to everyone including the wealthiest.
‘But we have now acted to expand the eligibility of the Winter Fuel Payment so no pensioner on a lower income will miss out.
‘This will mean over three quarters of pensioners receiving the payment in England and Wales later this winter.’
Former Pensions Minister Steve Webb said the new policy looks like it will create a cliff edge – £1 below £35,000 per year and you get the full benefit, £1 above and you lose £200.
‘This concession looks as if it wipes out most of the revenue from the policy, especially if you factor in the extra pension credit cost which is approaching £200million per year.’
Webb, who is now a partner at LCP, also questioned: ‘Although in effect each member of a couple over pension age gets £100 each, the person on £35,000 or above will presumably be taxed on £200 – so they are being taxed on their spouse’s income?’
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