“Prime Minister’s pledge to expand Winter Fuel Payments faces ‘formidable’ practical challenges”

Speaking at Prime Minister’s Questions today, Sir Keir Starmer said that he wanted “...to ensure that as we go forward more pensioners are eligible for winter fuel payments.”.    

He went on to say that options included raising the threshold for payments, and that a decision would be announced at the next ‘fiscal event’ – probably the forthcoming Spending Review announcement in June or else the Autumn Budget.

But LCP partner Steve Webb, who published a paper last year on the alternatives for changes to Winter Fuel Payments, has warned that a solution based on raising the threshold for entitlement could create serious practical challenges.

Issues that would need to be resolved include:

• The Government might need to invent a whole new system to work out who would be entitled and this could potentially take a long time to pass the necessary legislation and set up computer systems; getting this done for Winter 2025 would be a huge challenge;
• Any new system would work on an ‘opt-in’ basis where a claim would have to be made, and this in turn leads to a major risk of poor take-up; even with the well established Pension Credit system backed by massive publicity in the last year, around 1 in 3 of those entitled does not claim; take-up of a brand new system could be even lower than this.
• Simply raising the cut-off for entitlement could create new anomalies; the government would need to decide, for example, whether people brought into scope would also qualify for free TV licences (for the over 75s), cold weather payments and other ‘passported’ benefits associated with Pension Credit.

LCP analysis suggests that there are other options which would reduce the impact of the policy whilst still generating some revenue for the government:

• Reinstating Winter Fuel Payments but making them taxable, just as state pensions are taxable; this would mean that the wealthiest pensioners would pay back up to 45% of their WFPs;
• Paying WFPs in full only to people in lower value properties – such as Bands A-D – which is an approach which has been used in the past for cost of living payments;  
• Making payments only to older pensioners who are more likely to feel the cold and more likely to be spending a larger part of their day at home.

Commenting, Steve Webb, partner at pension consultants LCP said:

“Creating a brand new system to reinstate Winter Fuel Payments to the group of pensioners just above Pension Credit level could face formidable practical difficulties. Depending on how it was designed, this could entail a completely new system, with a new Act of Parliament and big changes to DWP computer systems. This could mean that any change would be unlikely to be implemented in time for this Winter.

In addition, any new system dependent on people making a claim would suffer from the same take-up problems as Pension Credit, meaning that many of those targeted would still miss out. The Prime Minister may find that he gets little political credit for a complex change which still leaves the majority of pensioners without any additional help with winter fuel costs.”