Means-testing Winter Fuel Payments: Not a binary choice

The Winter Fuel Payment is a lump sum of money paid to those who have reached state retirement age. The amount payable will vary depending upon the age of the recipient, the benefits in payment and whether there are other eligible people in the household. Payment is usually in the weeks leading up to Christmas each year.

On Monday 29th July the Chancellor Rachel Reeves MP made a statement to Parliament outlining:

“We have inherited a projected overspend of £22 billion. That is a £22 billion hole in the public finances now—not in the future, but now … today I am making the difficult decision that those not in receipt of pension credit or certain other means-tested benefits will no longer receive the winter fuel payment, from this year onwards. The Government will continue to provide winter fuel payments worth £200 to households receiving pension credit or £300 to households in receipt of pension credit with someone over the age of 80”.

The Scottish government has said that it cannot guarantee it will be able to provide universal winter fuel payments to pensioners after the chancellor announced the cut; the NI Assembly Finance Minister has said that the issue will have to be discussed by the NI Executive.

So far the discussion has mainly centred on means-testing the Winter Fuel Payment and whether the devolved administrations should make up the shortfall to maintain universal payments.

However the issue merits closer scrutiny and ultimately is not a binary choice.

There is no doubt that universal payments ensure 100% take-up and ensures that people who are not in receipt of Pension Credit (but should be) and those just above the Pension Credit limit receive support. This prompts the idea as to whether there can be a ‘near Pension Credit’ criteria added that could mitigate the impact of removing universality and provide support to those pensioners on lower incomes.

There is the consideration of whether scarce resources need to be more finely targeted towards meeting need. In other words should the payment be going to pensioners who do not need it? The use of Pension Credit as a proxy for need at one level works well as it is means-tested. However there is an acknowledged issue with take-up, with most recent estimates for England, Scotland and Wales suggesting that up to 40% of pensioners entitled to Pension Credit are not claiming it. Figures for Northern Ireland suggest that an estimated 66,300 (72%) of those families entitled to Pension Credit received it, with an estimated 26,300 (28%) potentially entitled to Pension Credit but not receiving it. Clearly there needs to serious thought given to targeted work with the independent advice network aimed at improving the take-up of Pension Credit, otherwise not only will pensioners miss out on the benefit but they will also miss out on the Winter Fuel Payment.

Finally to address the issue of whether consideration should be given to maintaining universal Winter Fuel Payments from the local devolved budget. This consideration needs to take place within the wider context of social security, poverty and need in Northern Ireland. It is acknowledged that the commitment to the triple lock since 2011 (increases in line with the higher of inflation, wages or 2.5%) has played a significant part in tackling pensioner poverty and this is set to continue. On the other hand in the same period we have seen welfare reform and austerity impact upon working age social security benefit recipients with benefit freezes, cuts to in-work support, cuts to disability benefits and cuts to benefits for families with children. This has contributed to child poverty figures in Northern Ireland reaching 24% for 2022/23. It is worth bearing in mind that a figure of 18% for 2021/22 prompted the NI Audit Office to state:

“A failure to tackle child poverty early and effectively risks lifelong impacts to children’s health, education and general development. There is also a considerable cost to the public purse, with previous estimates indicating costs of child poverty to be between £825 million and £1 billion annually.”

We await with interest the next move of the NI Executive on this issue.