Labour has faced mounting criticism following its decision to withdraw winter fuel payments of up to £300 from around 10 million pensioners. Pension credit applications have more than doubled since the policy announcement, adding significant pressure on the Treasury.
Recent government data revealed that 38,500 people applied for pension credit in the five weeks after the Chancellor’s announcement, compared to 17,900 in the five weeks prior. This surge could add an estimated £278 million in annual costs for the government, reducing Labour’s anticipated £1.5 billion savings from the policy.
Key Details of Labour’s Pension Credit Policy
On July 29, Labour’s Chancellor Rachel Reeves announced that only retirees with incomes below £11,343 would continue to automatically receive winter fuel payments. Previously, these payments were available to all state pension-age individuals. The policy shift was aimed at saving £1.5 billion, but the increased pension credit claims are expected to offset a portion of those savings.
Last year’s data shows that 850,000 eligible pensioners were not claiming pension credit, equating to roughly one-third of those entitled. Pension credit provides a state pension top-up and additional benefits such as reduced council tax, housing support, and free prescriptions. Claimants typically receive £3,900 annually, and with the winter fuel payment, this rises to at least £4,100. Pensioners over 80 years old are eligible for a £300 winter fuel payment.
Analytics firm Policy in Practice estimates that the cost to the government per pension credit claimant could reach £7,223 due to these added benefits.
Political Backlash and Economic Impact
The week of Reeves’ announcement saw 7,900 pension credit applications, double the number from the previous week. The government had estimated that an additional 95,000 pensioners would claim pension credit due to the new policy, though it’s uncertain if all applicants will qualify.
Prime Minister Rishi Sunak faced internal party tensions during the Labour Party conference in Liverpool, where delegates voted to oppose the winter fuel payment cut. Although non-binding, the vote reflected strong opposition within Labour itself. Previously, 50 Labour MPs defied party leader Sir Keir Starmer, refusing to support the policy in a parliamentary vote.
Pension Credit Impact on Older Pensioners
Statistics indicate that the cut disproportionately affects the oldest pensioners. Of the 11.6 million winter fuel payments made last year, 5.8 million went to households where residents were aged 75 or older, showing the vulnerability of older pensioners to these changes.
A government spokesman defended the policy, stating, “We are committed to supporting pensioners, and millions will see their state pensions rise by £1,700 during this Parliament under the triple lock policy. Given the public finances we inherited, it is essential to target support to those in need.”
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