A former pensions minister has warned that about five out of every six pensioners living below the “poverty line” could be at risk of being stripped of their Winter Fuel Payments. Sir Steve Webb, who is now a partner at pension consultants LCP (Lane Clark & Peacock), said analysis suggests that about 1.6 million older people who are below what is commonly regarded as the poverty line do not receive Pension Credit.
Chancellor Rachel Reeves and Prime Minister Sir Keir Starmer have faced criticism from opponents, campaigners and some of their own MPs over the decision to means-test Winter Fuel Payments, worth up to £300. Only those receiving Pension Credit or other means-tested benefits will be eligible for the payment this winter as a result of the Government’s decision, which ministers have said is needed to help fill a £22 billion black hole in the public finances.
LCP analysed Department for Work and Pensions (DWP) statistics on low-income pensioner households. It said that while there is not an official poverty line, the main benchmark used, both in the UK and internationally, is having a household income below 60 per cent of the national median average.
The latest DWP figures indicate that in 2022/23 there were 1.9m people over State Pension age across the UK living below this income level.
Analysis by LCP suggests 0.3m of these people are receiving Pension Credit. It said the remaining 1.6m do not receive Pension Credit and could potentially miss out.
People in this category may not receive Pension Credit simply because they have not claimed.
About 880,000 pensioners are thought to be in this position. The Government has launched a campaign to encourage those eligible for pension credit to claim it.
In other cases, people may have just enough to cover basic household bills but they may also have housing costs such as mortgage interest or rent which are not fully covered by the benefits system. These costs could push them below the poverty line.
Three ways to better target Winter Fuel Payments
The LCP analysis looks at other ways in which the Government could potentially make Winter Fuel Payments more targeted.
These include paying only to households:
- In Council Tax bands A-D
- Paying only to older pensioners aged 80-plus
- Bringing Winter Fuel Payments within the definition of taxable income
The analysis indicated that linking to Council Tax bands would protect the large majority of low-income pensioners, but would substantially reduce Government savings.
Paying only to older pensioners would still leave more than a million poorer pensioners aged under 80 still losing out, the analysis suggested.
Bringing payments into the tax net would raise only a modest amount – about £300 million – and would involve complex administration, the research suggested.
Sir Steve said: “There are a range of ways in which the Government could target spending on Winter Fuel Payments, but our analysis shows that limiting payments only to those on Pension Credit will leave the vast majority of pensioners below the poverty line losing out.
“As an alternative, Winter Fuel Payments could be targeted on those in lower value properties, which would protect most poorer pensioners, but would dramatically reduce the savings to the Chancellor.”
He added: “Taxing Winter Fuel Payments would raise far less than the Government’s plans and could be administratively complex.
“It is ultimately a matter for politicians to decide on the balance between raising revenue and protecting the vulnerable, but it is clear that continuing payments only to those on pension credit will mean large numbers of already low income pensioners losing out.”