The Winter Fuel Payment will be returning for most pensioners in England and Wales this winter.
WHY WAS IT RESTRICTED – AND WHY IS IT RETURNING?
Two days before her important Spending Review announcement, Chancellor Rachel Reeves largely completed a slow-motion U-turn on eligibility for the Winter Fuel Payment (WFP). In July 2024, one of Reeves’ first actions as Chancellor was to limit those entitled to the WFP to households in England and Wales in which someone was claiming pension credit or certain other benefits. It was a controversial move, which took away the payment from almost 90% of pensioners (aged 66 and above), saving a projected £1,500 million for the Exchequer.
NEW £35,000 INCOME CAP: WHAT IT MEANS FOR PENSIONERS
The change to eligibility announced in June means that only pensioners in England and Wales with income exceeding £35,000 a year (around two million in number) will be ineligible for the WFP in the coming winter. To achieve this, the government has borrowed an approach it uses for High Income Child Benefit Charge. If your income is over £35,000, then you can either:
• Receive your WFP – and have it clawed back by HMRC via your PAYE code or self assessment; or
• Make a WFP opt-out request to the DWP.
The second choice may not be available in time for this winter as no DWP system exists at present.
HOW DOES SHARED ENTITLEMENT WORK FOR COUPLES?
Mixing a household entitlement (WFP) with an individual-based tax system creates a further complication, which has been addressed by ‘sharing’ the WFP. For a couple aged under 80 where only one spouse has income over £35,000, the lower income spouse will be entitled to a WFP of £100 (£200/2) while their partner will have no entitlement. Sharing produces its own anomalies: a couple with £100,000 joint income split 70/30 will be entitled to a 50% WFP, while a couple with an income of £70,002 evenly divided will have no entitlement.
WILL THE PAYMENT AMOUNT INCREASE IN FUTURE?
The partial reinstatement of the WFP will cost the Treasury £1,250 million, the funding for which the Chancellor has not yet explained. Had there been no capping of entitlement at £35,000, the bill would have been £450 million more. Scotland and Northern Ireland have their own devolved winter fuel arrangements and Scotland has already announced it will broadly follow Reeves’ approach.
Footnote: If you are thinking £200/£300 does not sound much, that is because those amounts were set in 2003/04. Inflation adjusted, WFP is now nearly 80% higher.
