Winter Fuel Payment update: Labour to be hit with £4bn DWP bill if older Britons flock to Pension Credit

Last month, Reeves confirmed the Government's intention to no longer make the Winter Fuel Payment universal for pensioners.

In previous years, those of state pension age could get up to £300 off their energy bills over the winter months.

However, older households will now need to apply for means-tested benefits from the Department for Work and Pensions (DWP) to qualify for payments.

Among the benefits someone needs to be eligible for include Pension Credit, a top-up payment for state pensioners on low income.

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Based on the Chancellor's estimates, means-testing the Winter Fuel Payment would save the Treasury up to £1.4billlion annually.

However, a new report from think tank Policy in Practice, the decision could result in a £3.8billion bill if the 850,000 retirees eligible for Pension Credit begin to apply for it.

As part of Pension Credit, claimants are only able to receive a top-up if their weekly income if less than £218.15 if they are single of £332.95 if they are in a couple.

It is considered a "gateway benefit" to accessing other support including a free TV licence for over 75s and Housing Benefit.

Steve Webb, a partner at LCP, previously questioned the likelihood of such an uptake in the DWP benefit but warned of the potential impact it would have on public expenditure.

He explained: "It is highly likely that this announcement will lead to a flurry of new claims for Pension Credit.

"This is exactly what happened when entitlement to a free TV licence for the over 75s was restricted to those on benefit. But a big surge in take-up could slash the savings from this measure.

"If just one in four of those currently missing out on their entitlement to Pension Credit now makes a claim, this could cut the Chancellor’s savings by around one-third. One consequence of this is that additional cuts might be required to make up for the shortfall.”

Last week, the Scottish Government also decided to means-test its own version of the energy bill benefit in a blow to the country's pensioners.

This removal of support for thousands of older people comes ahead of the expected energy price cap rise from Ofgem in October.

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Nigel Huddleston MP, Shadow Financial Secretary, said: "Labour promised they would not pull the rug from pensioners this winter and are doing it anyway. They misled you in a cynical political move just to get your vote.

"Now it’s clear this exercise won’t even raise the money it is intended to, as pensioners being pushed into poverty by it would need to claim the benefits they currently don’t."

A Department for Work and Pensions spokesman said: "This government is committed to pensioners: protecting the triple lock, keeping energy bills low through our warm homes plan, and cutting NHS waiting lists – bringing real stability to people’s lives.We said we would be honest with the public and, given the dire state of the public finances we have inherited, this Government must take difficult decisions to fix the foundations of the economy.

"In these circumstances, it is right that winter fuel payments are targeted at those in most need, and we will work with local authorities to boost the uptake of pension credit, reaching the many pensioners who could still benefit from this year’s winter fuel payments .”