Pensioners with income of £35,000 or less to get FULL winter fuel payment

UK chancellor Rachel Reeves has confirmed that winter fuel payment rules will change again this year to expand the number of people who qualify to around 9 million. This follows weeks of speculation that the government would reverse the decision to limit payments to only those aged over 66 who are claiming pension credit or other means-tested benefits.

The new qualification criteria will mean everyone over the State Pension age will be paid £200 per household or £300 per household where someone is aged over 80, but it will be recouped from those with an annual income of over £35,000. Reeves said: "Targeting winter fuel payments was a tough decision, but the right decision because of the inheritance we had been left by the previous government.

"It is also right that we continue to means-test this payment so that it is targeted and fair, rather than restoring eligibility to everyone including the wealthiest.

"But we have now acted to expand the eligibility of the winter fuel payment so no pensioner on a lower income will miss out. This will mean over three quarters of pensioners receiving the payment in England and Wales later this winter."

These changes apply to England and Wales only, with Scotland and Northern Ireland setting their own rules.

What is the winter fuel payment?

Winter fuel payments were first introduced in 1997 – announced by the Labour chancellor Gordon Brown – to help those above the State Pension age with the cost of energy bills in the winter. The system was maintained as a universal payment for pensioners by successive governments until 2024, meaning everyone born on or before 24 September 1957 was paid the winter fuel allowance in 2023.

The exact payments have changed over the years, now standing at £200 for those under 80 and £300 for anyone over. Until the changes introduced by the government last year, the payments were made automatically with no need to apply.

What were the rules last winter?

The long-time rule that winter fuel payments are only available to those aged over 66 remained, but last winter eligible people had to be also claiming pension credit or other means-tested benefits. Pension credit is designed to top up pensioner incomes to £218.15 per week if you are single or £332.95 a week if you have a partner. This means that you needed to have less than those amounts coming in to be eligible.

Additionally, if you have more than £10,000 in savings, every £500 over £10,000 counts as an income of £1 a week. As a consequence, you could be receiving less than the minimum income amounts, but still not be eligible for pension credit because of the amount you have in savings. The calculations are slightly different for those with a disability, who care for someone or who have additional housing costs.

What will the new rules be?

Everyone in England and Wales who is over the State Pension age (currently 66) will initially be paid £200 per household, or £300 if someone in that household is over 80. In most cases the payment will be paid directly to members of the household in even proportions, so a couple over 80 would be paid £150 each. The exception is that a couple claiming Pension Credit would be paid the full amount in one lump sum. If one member of a couple is over 80 and the other is under 80, but over 66, the older person will get £200 and the younger £100.

The money will then be recouped from those recipients earning more than £35,000 per year. For most earning over the threshold, this will be done automatically through the tax system via pay-as-you-earn (PAYE). Any pensioners earning over the threshold who already file a self-assessment tax return will see the payment recouped through that. If one member of a household earns over the threshold, only their portion will be reclaimed through the tax system.

This means that a household with one person over 80 earning £70,000 a year and one person over 80 earning £30,000 a year would initially receive £300 through individual payments of £150 each. The higher earner would then see £150 recouped through PAYE, but the pensioner earning £30,000 would keep their £150 payment.

Pensioners will be able to opt out of receiving the payment if they do not not want it and the government has said no one will need to register with HMRC because of the payment.

How much will the winter fuel payment changes cost?

Rachel Reeves is expected to detail how the additional payments will be funded as part of the Autumn Budget, but reports suggest that the changes will cost around £1.25bn.

The decision to initially make the payments universal once again, but then recoup the cost from higher-earning pensioners at the end of the tax year, could be complex, especially if a recipient dies between being paid and the end of the tax year. However, creating a new, means-tested criteria that is not based on an existing benefit – like pension credit – was likely considered to be a too expensive and complicated option.

How to get help with your energy bills

The best way to get help with your energy bills is to make sure you are getting all the financial assistance you are eligible for. While winter fuel payments will be made automatically once again, many benefits require you to apply, including pension credit. Age UK has estimated that there are more than 800,000 eligible people not claiming pension credit. This means that they will be surviving on less than £218.25 a week for a single pensioner and less than £332.95 for a couple, but not getting the pension credit they are eligible for.

Checking what help you are entitled to online is easy, as is applying for benefits by using online calculators such as entitledto or the Turn2us benefits calculator.

Additionally, your energy supplier may be willing to agree to a more affordable payment plan if your energy bills have become overwhelming. It is best to contact them as soon as possible, but you can also follow the tips in our article 'How to save money on your energy bills'.