Labour's decision to means-test Winter Fuel Payments for millions of pensioners has already cost taxpayers £380million following a surge in benefits claims, analysts have warned. The move to strip the allowance from around 10 million pensioners was announced by Chancellor Rachel Reeves in July.
At the time, the Chancellor claimed it would save £1.4billion annually. However, analysis suggests the subsequent surge in Pension Credit claims has already significantly eroded the projected savings. This benefit is reserved for pensioners on low incomes.
The Government paid out £5.5billion in Pension Credit to 1.35 million households last year, with thousands more retirees now claiming the benefit for the first time. Since Reeves' announcement in July, Pension Credit claims to the Department for Work and Pensions (DWP) have more than doubled.
Weekly claims surged to around 9,500, compared to the previous level of 4,000, according to DWP figures. The DWP had budgeted for an additional 95,000 claims in the financial year, assuming an average annual cost per pensioner of £3,800.
The Department anticipated the surge in applications would cost £370million annually. However, analysts at Policy in Practice said Labour had not accounted for "passported benefits" linked to Pension Credit, such as council tax support and free prescriptions.
Former Pensions Minister Sir Steve Webb, now a partner at consultants LCP, warned that the surge in applications for the benefit following the Winter Fuel Payment's means-testing would significantly impact savings from the policy.
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"There is no doubt that the surge in applications for Pension Credit will reduce the savings from this policy, potentially costing the Government more than £200million per year in benefits for pensioners," he said.
The former Liberal Democrat Minister added that despite additional costs "the Chancellor will still see a meaningful saving from taking Winter Fuel Payments away from around 10 million pensioners".
Policy in Practice revealed the true average cost per pensioner is likely to be £6,800 annually, significantly higher than DWP estimates. This means Labour has already spent £388million on additional benefits, according to the company's analysis.
Any further claims in 2025 would reduce the £1.4billion savings target announced by Reeves. The think tank warned that if Pension Credit take-up rises by just nine percentage points to 74 per cent, the Winter Fuel raid savings could be completely eliminated.
Almost half a million people on pension credit are not claiming housing benefit despite being eligible, Policy in Practice found. The organisation calculated that eligible pensioners were missing out on more than £1.8billion in housing benefit alone.
Shadow Chancellor Mel Stride took aim at Labour's approach to the energy bills benefits for the elderly and questioned whether linking the Winter Fuel Allowance eligibility to Pension Credit is having the desired outcome that the Chancellor wants.
"Labour's approach to the increased poverty they are creating is to encourage more pensioners to apply for Pension Credit. But that is substantially eroding the savings," he told The Telegraph.
"Means testing the winter fuel payment is a dreadful decision. The Government's own figures show that it will mean tens of thousands of pensioners being plunged into poverty," Stride added.
"Means testing the Winter Fuel Payment is a dreadful decision. The Government's own figures show that it will mean tens of thousands of pensioners being plunged into poverty," Stride added. He also warned that if all entitled pensioners claimed the benefit, the extra costs would "outweigh the savings".
"The dreadful irony is that in fiscal terms, the Government is actually working against itself by attempting to soften the cruelty of this misguided policy," Stride added. Energy bills have risen by 1.2 per cent to £1,717 a year for a typical household, following recent changes to the energy price cap.
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Analysts Cornwall Insight forecast bills will increase further to £1,785 from April. While most households will pay less than last winter, when the price cap was set at £1,928, pensioners face higher costs due to the loss of Winter Fuel Allowance.
Charities have warned that older households face paying £500 more to heat their homes this winter alone as a result of the up to £300 in energy bill support for pensioners becoming means-testing.
A DWP spokesman said: "Over one million pensioners will still receive the winter fuel payment, and our drive to boost Pension Credit take-up has seen applications more than double with over 40,000 more pensioners now receiving it, as well as the winter fuel payment.
"We continue to urge anyone who thinks they may be entitled to pension credit to check now, as all eligible claims can be backdated, and anyone who makes a successful claim before December 21 will receive their payment."
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At the time, the Chancellor claimed it would save £1.4billion annually. However, analysis suggests the subsequent surge in Pension Credit claims has already significantly eroded the projected savings. This benefit is reserved for pensioners on low incomes.
The Government paid out £5.5billion in Pension Credit to 1.35 million households last year, with thousands more retirees now claiming the benefit for the first time. Since Reeves' announcement in July, Pension Credit claims to the Department for Work and Pensions (DWP) have more than doubled.
Weekly claims surged to around 9,500, compared to the previous level of 4,000, according to DWP figures. The DWP had budgeted for an additional 95,000 claims in the financial year, assuming an average annual cost per pensioner of £3,800.
The Department anticipated the surge in applications would cost £370million annually. However, analysts at Policy in Practice said Labour had not accounted for "passported benefits" linked to Pension Credit, such as council tax support and free prescriptions.
Former Pensions Minister Sir Steve Webb, now a partner at consultants LCP, warned that the surge in applications for the benefit following the Winter Fuel Payment's means-testing would significantly impact savings from the policy.
Do you have a money story you’d like to share? Get in touch by emailing [email protected].
"There is no doubt that the surge in applications for Pension Credit will reduce the savings from this policy, potentially costing the Government more than £200million per year in benefits for pensioners," he said.
The former Liberal Democrat Minister added that despite additional costs "the Chancellor will still see a meaningful saving from taking Winter Fuel Payments away from around 10 million pensioners".
Policy in Practice revealed the true average cost per pensioner is likely to be £6,800 annually, significantly higher than DWP estimates. This means Labour has already spent £388million on additional benefits, according to the company's analysis.
Any further claims in 2025 would reduce the £1.4billion savings target announced by Reeves. The think tank warned that if Pension Credit take-up rises by just nine percentage points to 74 per cent, the Winter Fuel raid savings could be completely eliminated.
Almost half a million people on pension credit are not claiming housing benefit despite being eligible, Policy in Practice found. The organisation calculated that eligible pensioners were missing out on more than £1.8billion in housing benefit alone.
Shadow Chancellor Mel Stride took aim at Labour's approach to the energy bills benefits for the elderly and questioned whether linking the Winter Fuel Allowance eligibility to Pension Credit is having the desired outcome that the Chancellor wants.
"Labour's approach to the increased poverty they are creating is to encourage more pensioners to apply for Pension Credit. But that is substantially eroding the savings," he told The Telegraph.
"Means testing the winter fuel payment is a dreadful decision. The Government's own figures show that it will mean tens of thousands of pensioners being plunged into poverty," Stride added.
"Means testing the Winter Fuel Payment is a dreadful decision. The Government's own figures show that it will mean tens of thousands of pensioners being plunged into poverty," Stride added. He also warned that if all entitled pensioners claimed the benefit, the extra costs would "outweigh the savings".
"The dreadful irony is that in fiscal terms, the Government is actually working against itself by attempting to soften the cruelty of this misguided policy," Stride added. Energy bills have risen by 1.2 per cent to £1,717 a year for a typical household, following recent changes to the energy price cap.
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Analysts Cornwall Insight forecast bills will increase further to £1,785 from April. While most households will pay less than last winter, when the price cap was set at £1,928, pensioners face higher costs due to the loss of Winter Fuel Allowance.
Charities have warned that older households face paying £500 more to heat their homes this winter alone as a result of the up to £300 in energy bill support for pensioners becoming means-testing.
A DWP spokesman said: "Over one million pensioners will still receive the winter fuel payment, and our drive to boost Pension Credit take-up has seen applications more than double with over 40,000 more pensioners now receiving it, as well as the winter fuel payment.
"We continue to urge anyone who thinks they may be entitled to pension credit to check now, as all eligible claims can be backdated, and anyone who makes a successful claim before December 21 will receive their payment."
Find Out More...