New research suggests that the savings made from the Labour Government’s decision to means-test the Winter Fuel Payment could be wiped.
An increase in claims for Pension Credit could result in Prime Minister Keir Starmer and Chancellor Rachel Reeves grappling with a £4 billion benefits bill.
Last month, Reeves confirmed the Government’s plan to stop making the Winter Fuel Payment universal for pensioners. In previous years, those of state pension age could receive up to £300 off their energy bills during the winter months.
However, now the benefit will only be available to those who are the most financially in need, who are already on pension credits or other means-tested benefits.
Reeves said the policy has been introduced because Labour has inherited a projected overspend of £22bn from the Conservatives.
According to the Chancellor’s estimates, means-testing the Winter Fuel Payment could save the Treasury up to £1.4 billion each year.
However, a fresh report from the think tank Policy in Practice suggests that the decision could lead to a £3.8 billion bill if the 850,000 retirees eligible for Pension Credit start applying for it.
As part of Pension Credit, claimants can only receive a top-up if their weekly income is less than £218.15 for singles or £332.95 for couples.
It’s viewed as a “gateway benefit” to other support, including a free TV licence for those over 75 and Housing Benefit.
Steve Webb, a partner at LCP, previously questioned the likelihood of such an uptake in the DWP benefit but warned about the potential impact on public spending.
He clarified: “It is highly likely that this announcement will lead to a flurry of new claims for Pension Credit.
“This is exactly what happened when entitlement to a free TV licence for the over 75s was restricted to those on benefit. But a big surge in take-up could slash the savings from this measure.
“If just one in four of those currently missing out on their entitlement to Pension Credit now makes a claim, this could cut the Chancellor’s savings by around one-third. One consequence of this is that additional cuts might be required to makeup for the shortfall.”
