Winter Fuel Payment cut decision imminent as some experts say scrap it
Ahead of the vote on Winter Fuel Payment changes, some finance experts are uncertain as to what the outcome might be as they explained how each result could affect household finances across the country. Jason Cannon, Benefits Consulting Director at Gallagher, sees two potential avenues arising - extra benefits or an extended deadline.
He explained: “Given that a cut to the Winter Fuel Payment could impact the finances of millions of pensioners, the Government should aim to prioritise extra financial support for retirees in the upcoming budget. Alternatively, the Government may choose to delay the decision so any potential cut can be folded into a wider spending review in the forthcoming Spring.”
However, the expert also highlighted: “The challenges are intricate and there is no ‘silver bullet’ solution. The reality is that the new qualifying benefit ‘Pension Credit’ for the Winter Fuel Payment has a low uptake, and this does not allow enough time for the situation to improve.”
He warned that enacting these changes this year could leave “millions of older people with little to no room to plan at a time when household budgets are already stretched” and highlighted the additional benefits Pension Credit will open up to these households. The expert explained: “The Credit is also a significant benefit in its own right. It could double as a gateway to other financial support such as a free TV licence, a reduction in Council Tax, and cheaper NHS services.”
Despite widespread anguish at the changes around Winter Fuel Payment, Samantha Gratton, Associate Director and Chartered Financial Planner at Ellis Davies Financial Planning, explained that a majority of the clients at Ellis Davies don’t rely on these payments but still “wouldn’t turn it down”.
She explained: “It doesn’t make any real difference to their day-to-day finances, and some even feel quite awkward receiving it. So, in theory, means testing makes sense, as it would help ensure help goes to those who need it most and is not going to those who don’t.”
The expert pointed out, however, that it’s still a potential loss for well-off households too due to the frozen personal allowance which means some pension pots are eligible for income tax bills. She continued: “We also have clients who wouldn’t qualify for the means-tested allowance, but have suddenly seen pension incomes being taxed. For these people, losing their Winter Fuel Allowance on top of now being taxed could make a big difference to their budgets.”
The Chancellor of the Exchequer Rachel Reeves put forward the Winter Fuel Payment change in her first days in office to plug the “blackhole” in public finances the former Conservative government left. The benefit was previously offered to all pensioners between £200 and £300 each winter to ensure they had a cosy home.
The Chancellor’s changes, which were originally set to be put in place this winter, would cut back on the eligibility so that only those above state pension age on certain benefits would qualify for the seasonal bonus. This single change would cut the amount of eligible recipients from 10.8 million to 1.5 million according to DWP estimates.
However, the measures have faced extreme backlash both among the public and others in parliament.