Soaring pension credit claims and a Government U-turn have mostly wiped out anticipated savings from a clampdown on Winter Fuel Payments, new figures reveal.
Successful applications for pension credit jumped 46 per cent to 181,100 in the year after the Treasury announced it would become the main route to receiving extra help with energy bills.
An outcry has now forced a reversal of the policy, and all pensioners with an income of up to £35,000 should receive the Winter Fuel Payment during colder weather this year.
Former Pensions Minister Steve Webb says assuming each claim cost £3,900 per year – the widely quoted average pension credit payment – this would have increased the benefits bill by £223million.
Outrage: Rachel Reeves’ Treasury saw a ferocious backlash to its decision last summer to axe Winter Fuel Payments for most older people
‘The original policy was expected to save around £1.5billion per year, but in June 2025 the Government announced a U-turn,’ he notes. ‘The Government estimated that the yield from the revised policy would be around £450million per year.’
This would put the net saving to the Government at around £227million – just £1 in £6 of the amount initially expected, according to Webb, a partner at LCP and This is Money’s pensions columnist.
‘It is entirely welcome that more pensioners who are entitled to pension credit are now claiming what they are entitled to.
‘But this surge in claims has put a further dent in the revenue from this ill-fated policy,’ he says.
What is pension credit?
Pension credit tops up weekly income to a minimum of £227.10 for single people and £346.60 for couples.
It also opens the door to a lot of additional help with household expenses, including housing costs, heating, council tax, TV licences if you are over 75, and other bills.
Meanwhile, the Winter Fuel Payment is worth from £100 to £300 a year.
> Claiming pension credit: Find out how to top up your weekly income
The latest pension credit figures also reveal an 88 per cent increase to 163,500 in claims not awarded in the year following news the WFP would be means-tested, showing that many worried about losing it were left empty-handed.
‘These figures lay bare the panic caused by the initial announcement,’ says Rachel Vahey, head of public policy at AJ Bell. ‘Pensioners swarmed to apply for pension credit and keep their Winter Fuel Payment.
‘The net saving from the whole exercise is likely to be miniscule. The silver lining in this whole debacle is that many more pensioners have been pushed into claiming pension credit and will therefore enjoy a better financial standard of living as a result.’
Meanwhile, pension credit claims have dropped more recently, down 16 per cent between the end of March and August compared with the same period the year before.
‘The pension credit surge triggered by last year’s Winter Fuel Payment changes is now easing, but the number of claims being rejected remains high,’ says Jon Greer, head of retirement policy at Quilter.
‘Successful awards are essentially flat and the number of claims processed with no award has increased by 2 per cent.
‘While interest in pension credit has grown, many applicants are still falling short of the eligibility criteria.
‘Last winter over half of processed claims were being denied, and these figures confirm that trend has continued.’
However, he welcomed news that the applications backlog has been cut 86 per cent from a peak of 85,600 outstanding claims in December to 12,100 by this month.
The sharp increase in pension credit claims over the past year was encouraged by the Government, which has actively tried to drive up applications, so this will have been factored into its sums to some extent.
But it saw a ferocious backlash to its decision last summer to axe Winter Fuel Payments for most older people.
Its subsequent U-turn means 9million pensioners – more than three quarters of those living in England and Wales – will get the payment worth up to £300 this winter.
The payment per household will be made automatically, but those over state pension age who have a taxable income above £35,000 will see it clawed back via their tax return, or they can opt out by 14 September.
The rules on Scotland’s Pension Age Winter Heating Payments are here.
Joanna Elson, chief executive of charity Independent Age, says: ‘Energy bills will be going up in October, so it is welcome news that more older people on low incomes will be see their incomes boosted before the winter.
‘More older people in financial hardship receiving support is positive, but far too many are still missing out.
‘The latest pension credit take-up figures show there are still almost one million eligible older people not receiving it.’
She urges the Government to introduce a take-up strategy that targets people in later life in need of financial support, and to simplify the application process.
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