Expert say one group will be hit by state pension increases
07:54, 24 Sep 2025Updated 07:54, 24 Sep 2025
A former pensions secretary has warned about a group who will lose the winter fuel payment next year(Image: Getty)
A former pensions minister has issued a warning that over 100,000 pensioners are likely to lose their winter fuel payment next year. Sir Steve Webb stated that the rise in the state pension and other pension increases due in April will result in more than 100,000 individuals no longer being eligible for a winter fuel payment.
Under the current regulations, pensioners can receive a winter fuel payment of up to £300 if their income is less than £35,000.
However, in a speech delivered in Parliament in June, pensions minister Torsten Bell confirmed that the Government has no plans to raise the £35,000 threshold this year.
Consequently, over 100,000 pensioners who received the winter fuel payment this year will find their income pushing them over this limit, leading to the loss of the benefit next year.
Furthermore, the number of those affected is predicted to increase throughout the remainder of this Parliament and could reach half a million by 2029.
This news will be a disappointment to millions of retirees who lost the winter fuel payment last year but were eligible for it this year. Steve Webb, now a partner at LCP, characterised these findings as a “rollercoaster” that does little to assist people in managing their finances during retirement.
He commented: “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.”
He further stated that as the threshold is set to be frozen for the foreseeable future, it means the policy will increasingly take effect as more individuals are pulled over the line.
Chancellor Rachel Reeves reinstated the winter fuel payment earlier this year, which is between £100 £300, depending on the circumstances. This means about nine million people who lost out last year will get the money in 2025. However, there is a £35,000 cut-off, with anyone earning that amount in taxable income having to pay it back.
Some financial experts have branded it ridiculous – because a couple earning £70,000 split to £35,000 each would get the winter fuel payment . It has created a cliff-edge – a pensioner with taxable income of £35,001 will lose their Winter Fuel Payment (worth £200–£300), while someone earning £35,000 keeps it in full, Newspage reported.
Scott Gallacher, Director at Leicester-based Rowley Turton, said single pensioners often face higher relative living costs, as they bear council tax, utilities, and household bills without the ability to share these expenses.
He added: “It’s ludicrous that a single pensioner on just £35,001 loses a Winter Fuel Payment, while a couple with £70,000 joint income might keep theirs. This isn’t just unfair — it undercuts the government’s own growth agenda.
“If you want older workers to return or stay in work, you can’t penalise them with cliff-edges like this. Means-testing should reflect household income or use a taper, not an arbitrary line that punishes being just a pound over. When will the government learn?”Eamonn Prendergast, Chartered Financial Adviser at Bromley-based Palantir Financial Planning Ltd, said the cliff-edge feels “more like lottery” than a fair system.He continued: “The £35,000 cliff-edge is a blunt instrument that punishes single pensioners the most. A couple on £70,000 can keep their Winter Fuel Payments, but a widowed pensioner on £35,001 loses theirs entirely, that’s hard to justify as fair policy.
“Household bills don’t halve just because you live alone, and single pensioners often face higher relative costs. A tapered withdrawal would be far fairer than an all-or-nothing cut-off.
“At the very least, the system should recognise household income, not just individual income, if it genuinely wants to target support. Right now, this approach feels less like a cost-saving measure and more like a lottery and it risks hitting those who need help most.”
Personal finance expert Martin Lewis has spoken about the issue and warned people they need to get their finances in order. Mr Lewis has confirmed some people on benefits who think they are immune from the limit could be targeted too – as some benefits are in fact taxable – meaning if the portfolio of income including jobs, savings and other sources together with their benefits could push them over the edge – meaning they’d have to pay back the payments of £200 or £300.
Speaking on his BBC Podcast Mr Lewis listed the benefits which could fall foul of the rules. Martin said: “Let’s say you earn £40,000 of taxable income. If you earn £35,000 and a penny, you lose the entire £200. It is not a graduated scheme, it is a cliff edge scheme.”
Mr Lewis said investment dividends outside an ISA count, carer’s allowance, incapacity benefit and other taxable state benefits also count.
In terms of what doesn’t count towards the £35,000 earnings amount Mr Lewis said it included the winter fuel payment itself, investment income or savings income inside ISAs, the tax free lump sum from a pension, capital gains, and non-taxable benefits like Attendance Allowance, Disability Living Allowance Pension Credit and PIPS all don’t count towards the £35,000. He added: “If it’s generally taxable, it counts, if it’s generally not taxable, it doesn’t count.”
State benefits that are taxable
The most common benefits that you pay Income Tax on are:
Bereavement Allowance (previously Widow’s pension)Carer’s Allowance or (in Scotland only) Carer Support Paymentcontribution-based Employment and Support Allowance (ESA)Incapacity Benefit (from the 29th week you get it)Jobseeker’s Allowance (JSA)pensions paid by the Industrial Death Benefit schemethe State PensionWidowed Parent’s Allowance
Speaking on his BBC podcast, Mr Lewis said that in some cases it would be far simpler to just decide to opt out of the payment, rather than have it land before ending up having to repay it.
People can opt out of the payment on the DWP website here.