Payments to assist with covering energy bills will be extended to single pensioners earning less than £35,000 or households over state pension age earning less than a combined £70,000, Chancellor Rachel Reeves announced.
Eligible households will receive £200 in either November or December this year. The payment rises to £300 for over-80s.
If you are a pensioner living with another pensioner who earns more than £35,000, but earn less than the threshold, you will receive half of either the £300 or £200 cash boost.
The Treasury confirmed if you are a pensioner earning over £35,000, the financial support will be paid but then recovered automatically.
Despite speculation there would be a tax ‘clawback’ operation for payments sent to those earning more than the new threshold, the Government has said this will be made through PAYE or a self-assessment tax return.
Why Life Insurance Still Matters – Even During a Cost-of-Living Crisis
Sponsored by Post Office
However, pensioners will not need to sign up with HMRC.
If pensioners wish to opt out of the payment as they do not require it, a new system will be created to administer the returned funds.
Pensioners in Scotland will receive £100 automatically, while those on benefit supports including Universal Credit and Pension Credit will be paid the cash automatically.
The policy turnaround comes just under a year after the payments were cut for millions of pensioners in the UK.
For the first time since 1997, a means-tested method was introduced, where pensioners needed to claim either Pension Credit, Universal Credit, Income Support, income-related Employment or Support Allowance or Jobseeker’s Allowance.
Since then, two Scottish pensioners have launched a legal challenge to the policy, as around 50,000 pensioners were forecast to fall into poverty following the controversial policy.
‘Good day for older people’
Caroline Abrahams, charity director at Age UK, said: “The Government’s Winter Fuel Payment announcement makes this a good day for older people.
“The decision to restore the Winter Fuel Payment to nine million pensioners – all but those on the highest incomes who should be able to pay their heating bills without it – is the right thing to do and something that will bring some much-needed reassurance for older people and their families.
“Age UK heard from many through the winter who were so frightened about their bills that they didn’t even try to keep their homes adequately warm.”
Abrahams added: “We have always said what really matters is that the estimated 2.5 million older people who lost their Winter Fuel Payment when they couldn’t afford it get the money back, by one means or another.
“These 2.5 million comprise older people entitled to Pension Credit but not claiming it; those whose small incomes take them just above the line; and a third group who face extremely high bills because of severe ill health or disability.
“This new policy will help all these people by restoring their Winter Fuel Payment and we welcome it as a result.”
‘Process of making payment is cumbersome’
However, Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, voiced concerns for those earning more than the £35,000 level.
Haine said: “The process of making the payment is cumbersome and may be confusing for those on higher incomes.
“Pensioners earning above £35,000 will receive the payment automatically and then have it recollected via PAYE or their self-assessment tax return. There will be the option to opt out of receiving the payment, in a similar fashion to parents who opt out of receiving Child Benefit if they earn too much.
“This might be more straightforward for those that find the new system confusing and don’t want the hassle of the payment being recovered, though pensioners will have to wait for the details of that option to be confirmed.”
She added: “Many retirees are still grappling with the fallout from the cost-of-living crisis and frozen tax thresholds and with the full new state pension now edging ever closer to the standard personal allowance threshold of £12,570 – the point at which any income is liable for tax – it means more retirees, including those that only have small private pensions, will be subject to tax on their retirement income.”
