Half a million pensioners could lose winter fuel payments over four years as threshold frozen

More than 100,000 pensioners are set to lose their Winter Fuel Payments next year after increases to the state pension push their total income over the £35,000 eligibility threshold, analysis by consultants at LCP shows.

With the £35,000 cut-off frozen for the foreseeable future, the number affected is expected to grow in coming years. LCP says as many as 500,000 pensioners could lose their Winter Fuel Payments over the next four years, depending on the rate of inflation and how pension incomes rise in lockstep with inflation.

Steve Webb, This is Money's pensions columnist and a partner at LCP, cautioned that the freeze will cause the policy to bite harder over time as inflation-linked increases in other pensions push more people over the threshold. He said, "The new £35,000 cut-off for Winter Fuel Payments is set to be frozen for years to come, meaning that the policy will bite progressively harder as inflation-linked increases in other pensions cause people to cross the £35,000 line. Given that inflation-linked increases are simply designed to maintain people's standard of living, it is hard to see why they should be treated as making people ‘better off’ and hence less deserving of a Winter Fuel Payment."

Winter Fuel Payments of £300 are paid automatically to pensioners who haven’t opted out, with the money later recovered from those who aren’t eligible. Those who received WFP in 2023, lost it in 2024 when it was means-tested, and then received it again in 2025 when it was restored to those earning under £35,000 will now lose the payments again in 2026.

Webb 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."

This year, Winter Fuel Payments of £300 are expected to reach about nine million pensioners, but an estimated two million in England and Wales who are over state pension age and have a taxable income above £35,000 will not be able to keep it if they did not opt out.

For example, someone with an income of £33,600 who is currently entitled to WFP could lose the payment in 2026/27 as their pension income rises with inflation. If the state pension increases by 4.7% and a person’s company pension grows by 4%, their total pension could reach £35,027, pushing them above the eligibility ceiling for the £300 Winter Fuel Payment.

The state pension is set to increase by 4.7% in April next year as part of routine changes designed to keep pace with inflation. Pensions Minister Torsten Bell announced the threshold would remain unchanged, saying, "It is a round number, and we do not intend to change it in the years ahead. We will leave the £35,000 at the current level, as all thresholds in the income tax system are frozen for the coming year, so that pensioners know that that is the threshold and there are no surprises."

This year, roughly nine million people are expected to receive Winter Fuel Payments, but the policy excludes about two million in England and Wales who are over state pension age and have taxable incomes above £35,000 unless they had already opted out.

The campaign around the threshold comes amid ongoing questions about how pensioner support is adjusted when incomes rise with inflation. A detailed projection from LCP indicates that the freeze could translate into a growing number of retirees losing the annual £300 payment, even as overall pensioner income remains relatively protected from immediate declines in living standards.

While the policy remains unchanged for the near term, analysts note that the fiscal and political considerations surrounding means-testing and automatic payments make the WFP program a focal point in discussions about retirement support and cost-of-living resilience for older households.

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In summary, the combination of a frozen threshold and inflation-linked pension increases is expected to continue narrowing the pool of eligible Winter Fuel Payments in the coming years, according to LCP’s analysis. Policy makers will face continued scrutiny over whether the current approach adequately supports pensioners who rely on these payments as part of broader retirement and energy-cost support.