The UK government is currently considering a significant policy shift involving the winter fuel payment for pensioners. After last year’s decision to limit the benefit to those receiving means-tested Pension Credit sparked widespread criticism, Prime Minister Keir Starmer has announced a reversal.
According to GB News, officials are now exploring ways to restore the payment universally while recouping costs from higher-income pensioners through the tax system.
Details remain sparse at this stage, but the move aims to address concerns about fairness and simplicity in the distribution of winter support for vulnerable pensioners.
Background on Winter Fuel Payment Changes
Last July, Chancellor Rachel Reeves announced cuts to the winter fuel payment, limiting it to pensioners on means-tested Pension Credit in England and Wales.
This reform removed the payment from people with incomes above £11,800 annually for individuals or £18,000 for couples, affecting approximately 10 million pensioners. The payment amounts to either £200 or £300 per year per recipient.
The policy faced strong public opposition, notably impacting voting patterns in recent English local elections.
Government’s Proposed Approach and Challenges
Rather than creating a new complex means test, officials are considering reinstating the winter fuel payment as a universal benefit and recovering funds through the tax returns of higher-income pensioners.
This method would simplify administration by avoiding disputes around income thresholds.
There are a number of options being considered and that is one of them – said an official close to the discussions.
A precedent exists in the child benefit system, where high earners have benefits clawed back via tax returns—a policy introduced by former Tory chancellor George Osborne. Former Labour shadow chancellor Ed Balls supported this approach, stating on the Political Currency podcast, which he co-hosts with Osborne:
What they should do is a big U-turn, just say, we’re going to restore the winter fuel allowance to everyone and then withdraw it through the tax system from the highest-income pensioners – He added
That’s what you did with child benefit and you can do that because the higher income pensioners will be doing their tax return, you have got their income information.
Concerns About Implementation and Fairness
Experts warn that modeling winter fuel payment recovery on the child benefit charge system may encounter difficulties. The high-income child benefit charge has sparked tax tribunal cases and controversies since its introduction in 2010.
Emma Rawson, director of public policy at the Association of Taxation Technicians, cautioned that replicating this system could be unwise due to unresolved issues.
One significant limitation is that not all wealthier pensioners are required to file self-assessment tax returns; only those with additional income or capital gains must do so.
This could leave a gap in the government’s ability to reclaim payments from some higher earners.
