The Department for Work and Pensions has admitted that plans to restrict winter fuel payments will push 50,000 pensioners into poverty.
Chancellor Rachel Reeves announced plans to means-test the £300 payment at the October Budget. Previously available to all people aged over 66, the payment is now only available to people receiving pension credit.
In a letter to parliament’s Work and Pensions Committee, work and pensions secretary Liz Kendall said there will be an extra 50,000 pensioners in absolute poverty in 2024-25 and for each of the next five years, compared to not introducing the policy.
When using relative poverty – which means living in a household whose income is below 60% of the median income in that year – the number rises to 100,000 extra pensioners in poverty each year between 2026-27 and 2029-30. All of the figures include housing costs.
The figures represent a 0.2-0.3 percentage-point rise in the number of pensioners in absolute poverty in each of the six years, and a corresponding 0.5-0.7 percentage-point rise in relative poverty.
The figures are not cumulative, as people affected by the cut may move in and out of poverty from year to year.
The letter notes that since the figures all rounded to the nearest 50,000, “small variations in the underlying numbers impacted can lead to larger changes in the rounded headline numbers”. For example, an increase of 74,000 would be rounded to 50,000, whilst an increase of 76,000 would be rounded to 100,000.
The modelling does not take into account the impact of DWP’s efforts to increase takeup of pension credit, Kendall said. She said its campaign – which included writing to 120,000 pensioners who receive housing benefit – had boosted applications for the benefit by 152%.
People qualify for pension credit if they – and their partner, if they have one – have reached state pension age, and if either they or their partner receives housing benefit for people over state pension age. The benefit tops up income from pensions, earnings or means-tested benefits such as carer’s allowance to £218.15 a week for single people and £332.95 for couples.
Appearing before the committee on 13 November, Kendall said it was a "concerning issue that over 800,000 pensioners are not claiming pension credit and therefore they also will not get the winter fuel payment".
Kendall said DWP is working to bring together the administration of pension credit and housing benefit “In the longer term… to ensure that pensioner households receive the benefits to which they are entitled”.
In the letter, Kendall said she was revealing the modelling as part of her “commitment to being open and transparent with the public and parliament on all matters relating to DWP including on the winter fuel payment”.
“Means-testing winter fuel payments was not a decision this government wanted or expected to take. However, we were forced to take difficult decisions to balance the books in light of the £22bn black hole we inherited,” she said.
“Given the dire state of the public finances, it’s right that we target support to those who need it most while we continue our work to fix the foundations and stabilise the economy – which is the best way to support pensioners in the long term and is what has allowed us to deliver our commitment to the triple lock.”
Call for 'more detailed assessment' on poverty impact unanswered
While the modelling sheds some light on the broad impact of the winter fuel payment cut, it does not answer a number of questions put to Kendall by DWP's independent advisers on social security.
The modelling was released a month after the Social Security Advisory Committee wrote to Kendall asking for the department to provide a "clear understanding of those pensioners who may fall into poverty, and what percentage of these are in older households – in particular those who reached state pension age prior to 2016 and therefore are unable to receive the new state pension".
In September, Keir Starmer, said the government had not carried out an impact assessment of the Social Fund Winter Fuel Payments Regulations 2024 – the legislation through which the winter fuel payment changes have been made. Asked what analysis had been done on the policy, the prime minister said: “There isn’t a report on my desk which somehow we’re not showing.”
At the time, the PM said an impact assessment was not legally necessary and that the impact of the cut "will be mitigated by pension credit, by the housing benefit".
Quoting the PM in his letter in October, SSAC chair Stephen Brien said: "Given the scale of pensioners who will be affected by this change, and the speed at which it is being introduced, we are not similarly reassured that this will be the case and are of the firm view that a more detailed assessment is urgently required, in particular, on the potential poverty impact."
Brien also asked how many pensioners already in poverty would find themselves in deeper poverty as a result of the cut, and what the impact would be on people with protected characteristics. "For example, we understand that the ethnicity profile has not been considered," he said.
Responding to the letter last week, Kendall did not address most of the queries directly but directed the SSAC to DWP stats showing an estimated 63% of families who were entitled to pension credit received it in 2022-23. The figures include breakdowns by age and family status, but Kendall noted that there is "general uncertainty" around how pension credit takeup varies according to other protected characteristics "given the complexity of estimation".
She added: "I am assured that my department will, as part of our ongoing duties, continue to review the information available to understand those with protected characteristics that are entitled but not receiving pension credit."
Kendall also used the letter to confirm that DWP will not – as the committee recommended – use an urgent amendment to the legislation to add people who receive the full rate of pensioner housing benefit to the winter fuel payments. The committee also asked DWP to "assess the equity" of excluding housing benefit as a qualifying benefit for the fuel payment.
The work and pensions secretary instead pointed to its pension credit take-up campaign, adding that the department is "determined to do everything we can to maximise take-up of pension credit".
She also declined to take up the committee's call to "urgently" review the same campaign to ensure people receiving non-means-tested disability benefits such as Personal Independence Payment "are sufficiently engaged and aware of the options available to them".
She said the campaign "is aimed at encouraging everyone who could be entitled to claim".
Pension credit delays won't block winter fuel payments
In the October letter, the SSAC asked for "urgent reassurance” that processing delays will not stop eligible pensioners from receiving winter fuel payments this year.
Brien said the committee was “concerned about the capacity of the department to process pension credit claims in a timely way”, noting that extra staff being brought on to process pension credit claims would need two months' training before managing live caseloads.
In her response, dated 12 November, Kendall said DWP had deployed 500 additional staff "to support the increase in applications generated from the successful pension credit take-up campaign".
However, she admitted that there could be delays to processing applications.
" The department has a strong desire to meet its published timeliness standard of processing claims but that will depend on the complexity of claims and overall level of claims intake. There are escalation arrangements for cases where individuals are identified as being vulnerable or in immediate hardship."
Kendall said people will not miss out on winter fuel payments even if their pension credit application takes longer to process than usual and that pension credit can be backdated for three months, provided people make a claim by the 21 December deadline.