Government savings from winter fuel payment changes falling fast, analysis claims

The government said the controversial change would raise £1.4bn

Government savings from last year’s changes to the winter fuel payment are already less than planned, new analysis has revealed.

Announcing the cutting back of the cold weather benefit in July last year, Rachel Reeves said the measure would shave £1.4bn from the DWP bill this financial year. This was done by means-testing the payment to make only pensioners claiming pension credit eligible for it.

But research from Policy in Practice shows that the number of new pension credit claims meant the government had been forced to overspend on the change already, in the first week of January. And any more claims made before April will continue to eat into the savings further.

This is because the government did not factor in additional Treasury-funded support that pensioners claiming pension credit can access in their assessments, writes Policy in Practice director Deven Ghelani. This means that instead of each pensioner costing an average £3,900 more, as the government predicted, they will cost a much higher £6,800.

Chancellor Rachel Reeves in December (PA) (PA Wire)

Pension credit is often called a ‘passport benefit’ by experts as, alongside topping up a pensioner’s income to £218.15, it can open up support to housing benefit, council tax Support, the warm home discount, free prescriptions and more

Following the changes to the winter fuel payment, the take up rate for pension credit lifted from 63 per cent to 65, as 220,000 pensioners put in their applications. The DWP also renewed its annual pension credit take up campaign after this, encouraging all eligible pensioners to apply.

Mr Ghelani said: “It’s great news that more pensioners are getting the financial support they need. The increased income for some of the country’s poorest elderly citizens can have wider benefits, providing much needed relief during a cost of living crisis.”

However, his analysis adds that if just 74 per cent of those eligible were to successfully claim the benefit, all of the £1.4bn saved from the changes would be erased. And a 100 per cent take up rate would actually cost the government around £400 million.

While a take up rate as substantial as this before April is very unlikely, just the two per cent uptick alone was enough to put huge pressure on DWP staff, despite 500 extra being brought in. The Independent revealed in December that many pensioners still face waits of over 100 days to secure their winter fuel payment for 2024.

Mr Ghelani said: “Policy in Practice has seen unprecedented demand, helping one in four local authorities to run Pension Credit take up campaigns in the lead up to Christmas. We’ve also been using data to target the Household Support Fund to pensioners just missing out on the Pension Credit threshold.”

“It has meant a life changing boost in income for hundreds of thousands of pensioners living in poverty.”

Responding to the Policy in Practice report, a government spokesperson said:“We do not recognise these figures. An increase in Pension Credit claims, including effects on Housing Benefit and other cash benefits, were factored into the savings certified by the independent OBR.

“It is right that more pensioners are provided with the support they are entitled to. Pension Credit can still be backdated by up to 3 months and is worth on average £4200 so we continue to urge everyone eligible to apply.”