Winter fuel payment U-turn in place this year, says chancellor

Changes to winter fuel payments to allow more people to receive it will be in place this year, the chancellor has said.

Rachel Reeves said more people would qualify for the allowance “this winter”, however details of how the changes will be made and who will be eligible remain unclear.

It comes after Prime Minister Sir Keir Starmer said he wanted to widen the threshold for winter fuel in a U-turn on one of Labour’s first major policies since winning power last year.

The payment, worth up to £300 to help cover energy costs at the coldest time of year, was paid only to those on pension credit last winter, but the policy was widely blamed for Labour’s poor showing at recent local elections.

It meant 10 million fewer pensioners received the money in 2024. There was particular concern among charities and some MPs about those whose income was slightly too high to qualify, but were hit by the loss of the payment as energy costs remained expensive.

“People should be in no doubt that the means test will increase and more people will get winter fuel payment this winter,” Reeves said.

Those pensioners eligible receive the money automatically in November or December. Under the short-lived current system, they are required to claim pension credit – which is a top-up to the state pension for those on low incomes.

However, speaking to a committee of MPs, the pensions minister Torsten Bell said there would be no return to the previous system in which the payment was made to all 11.4 million pensioners.

“It’s not a good idea that we have a system paying a few hundreds of pounds to millionaires, and so we’re not going to be continuing with that,” he said.

“But we will be looking at making more pensioners eligible.”

Sir Keir admitted in a BBC interview that clarity on the new winter fuel payment policy was needed as soon as possible, but details may not be clear until the autumn Budget.

In a speech in Greater Manchester on Wednesday, Reeves said the economy was now in a “better shape,” and that the government “had listened to the concerns people had about the level of the means test”.

The decision to means-test the previously universal payment was one of the first announcements by the chancellor after Labour’s landslide election victory last year.

The government has insisted the policy was necessary to help stabilise the public finances, allowing the improvements in the economic picture which Sir Keir said could result in the partial reversal of the measure.

The practicalities of doing so are complicated. One option would be a system in which people on certain incomes can make a claim.

Clawing back a payment via the tax system for those on higher incomes is another possibility.

The government has yet to outline which mechanics it intends to use to enact its change of policy.