Warning to pensioners as Rachel Reeves strips 500k of winter fuel payment

Half a million pensioners could lose their Winter Fuel Payments in the next four years, bombshell analysis shows. OAPs will be clobbered because of Rachel Reeves' freeze on how much income can be free of tax and changes to the vital benefit.

Currently, retirees with income over £35,000 will not receive the winter fuel payment, which is worth up to £300. As the state pension is expected to rise by 4.7% next April, in line with the Triple Lock, and other pensions are expected to go up in line with inflation at around 4%, it means a large number of pensioners' income will be pushed above this amount.

A former pensions minister warned it amounts to a punishing stealth raid by the Chancellor. Detailed analysis of the data by consultants Lane Clark & Peacock reveals that more than 100,000 pensioners could find themselves above the threshold next year.

This could soar to almost 500,000 by the end of this parliament in 2029.

Ex-pensions minister Sir Steve Webb, a partner at LCP, said: "It is hard not to see this as yet another 'stealth' tax. The freezing of income tax allowances and thresholds has seen millions more pensioners dragged into the tax net purely because of inflation.

"The freezing of the Winter Fuel Payment threshold will make matters worse."

It comes after Ms Reeves triggered widespread anger when she scrapped the winter fuel payment for up to 10million pensioners within weeks of becoming Chancellor last year.

She was forced into a three-quarter u-turn following a major backlash and a successful campaign by the Daily Express. All pensioners now get the benefit unless their annual income is above a £35,000 threshold.

Sir Steve added: "People who cross the line in the coming years will have experienced a Winter Fuel Payment 'rollercoaster', first having it taken away, then given back and now lost again. "Such constant changes do little to help people manage their finances in retirement".

Silver Voices campaigned alongside this newspaper to reverse Labour's winter fuel payment cut.

A Government spokesperson said: "It is right that fuel support is targeted, and the threshold means the vast majority of pensioners will benefit from a Winter Fuel Payment this winter.

"On top of this, our commitment to the Triple Lock - which we have just reaffirmed - means millions of pensioners will see their State Pension rise by £1,900 over the course of this parliament.

"And thanks to our efforts to boost Pension Credit take up, over 57,000 extra pensioner households were awarded the benefit, worth on average £4,300 a year."

Many retired people will have breathed a sigh of relief when the Government changed its mind over Winter Fuel Payments.

Instead of limiting payments only to those on Pension Credit, for this winter the payment will go to anyone whose taxable income is under £35,000.

But there is a sting in the tail.

That £35,000 figure will apply not just in winter 2025, but also in 2026, 2027 and on into the future.

Ministers have said in the House of Commons that 'we do not intend to change it in the years ahead'.

Even if state pensions and other pensions just rise each year in line with inflation, more and more retired people will find themselves over the £35,000 limit and ceasing to qualify for a Winter Fuel Payment.

At LCP we have calculated that if the state pension rises by 4.7% next April, in line with the 'triple lock' policy, and other pensions go up in line with inflation at around 4%, someone on £33,600 this year could go over the £35,000 limit and lose up to £300 per year in help towards their fuel bills.

More than 100,000 pensioners could find themselves in that position next year.

With every passing year that the £35,000 threshold is frozen and pensions go up, more and more people are set to lose out.
Depending on inflation levels in the coming years, we could easily see half a million people currently in the £30,000-£35,000 range lose out by 2029.

And unless the £35,000 is hiked in future, they are likely to lose the payment for good - leaving them thousands of pounds out of pocket over the course of their retirement.

It is hard not to see this as yet another 'stealth' tax. The freezing of income tax allowances and thresholds has seen millions more pensioners dragged into the tax net purely because of inflation.

The freezing of the Winter Fuel Payment threshold will make matters worse.

Its director Dennis Reed said: "Silver Voices only reluctantly accepted the winter fuel payment reversal on the basis that the large majority of pensioners on modest incomes would continue to receive it in the future.

"The illogical decision not to inflation proof the benefit is a betrayal of older people and reignites the scandal that has caused so much political damage to Labour.

"This pathetic money grabbing from pensioners will cause many thousands to fear the coming winter."

It comes amid warnings that Ms Reeves has been told to mount a £6bn tax raid on pensioners, landlords and the self-employed by a leading Labour think tank.

The Resolution Foundation, which has close ties to senior figures in the Government, said the Chancellor should cut National Insurance by 2p and add it to income tax.

The intervention, a little over two months before the Budget, comes as Ms Reeves considers how to address an estimated £20billion shortfall in the public finances.

The move would raise £6billion by adding to the tax bills of those who do not pay employee National Insurance, such as pensioners, the self-employed and landlords.

The changes would affect around 8.7million pensioners already paying income tax and 4.3million self-employed workers.

It is part of a raft of proposals from the think tank to raise more than £30billion annually to restore the nation's finances that have been wiped out by Labour's failure to implement welfare reforms.

Adam Corlett, an economist at the Resolution Foundation, said: "The Chancellor should do all she can to avoid loading further pain onto workers' pay packets. She can do this by switching our tax base away from employee National Insurance and onto income tax, which is paid by a far broader group in society."

More pensioners are already set to pay income tax next year as the triple lock takes the state pension to around £12,536 per year, just shy of the income tax allowance of £12,570.

It means any of those retirees with a private pension or other income of more than £34 can expect to pay income tax.

Shadow Work and Pensions Secretary, Helen Whately said: "The economy is already flatlining thanks to Rachel Reeves' tax hikes, and now she plans to deepen the damage by forcing 8.7 million pensioners to pay more.

"This Government's instinct is always to increase tax and hit the pockets of older people hardest. And this won't be the only tax hike - everyone will suffer, with more rises coming down the line for workers and businesses."

She added: "Instead of reforming welfare and freeing businesses to grow the economy, Labour reach straight for the tax lever - punishing those who have worked hard all their lives.

"Britain doesn't need more raids on the elderly; it needs a government with the bottle to fix welfare, reward work, and drive growth."

Torsten Bell, the Resolution Foundation's former chief executive, is a minister in the Department of Work and Pensions and the Treasury, and was recently handed a central role in writing the Budget.

Last year the think tank's economists recommended Ms Reeves cut inheritance tax relief for farmers and family businesses, a policy she adopted.