DWP sees huge rush for £3,900 income top-up after Winter Fuel Payment cuts

The number of Pension Credit claims has doubled since announcement that it will be one of the few remaining ways to access the Winter Fuel Payment

The number of claims for a £3,900 income top-up has soared because it will be one of the few remaining ways to access the newly-restricted Winter Fuel Payment. Chancellor Rachel Reeves says the allowance will now only go to those on Pension Credit, along with some other means-tested benefits that can be claimed by mixed-age households, to help plug a £22 billion black hole in Britain's finances.

As a result, the number of people applying for Pension Credit - worth an average of £3,900 a year - has doubled. While around 1.4 million pensioners are already on the benefit there are up to an estimated 880,000 eligible households who are missing out.

Claims for Pension Credit doubled in the weeks following the Government's announcement, according to Department for Work and Pensions figures. Some 38,500 pension credit claims were received in the five weeks since the Chancellor announced the restrictions on July 29, compared with 17,900 claims in the five weeks up to that. This represents a 115 per cent jump in Pension Credit claims.

READ MORE:

• Thousands of state pensioners could boost payments with free HMRC top-up
• DWP now checking exactly who will get Winter Fuel Payment after huge rule change

Speaking on ITV's Good Morning Britain, consumer champion Martin Lewis said of the extra 20,000 people claiming over five weeks: "If they continue to do so over the next couple of months before we get to the Winter Fuel Payment time, that's maybe an extra 60,000 people. That still leaves over 800,000 people who are eligible [but] not claiming."

"The mechanisms that the Government are putting in place may help a few more claims but there will still be huge numbers who aren't claiming. And I haven't yet heard a decent answer about what we're going to do to help those people. How are we going to stop them having to choose between heating and eating?"

The Government has faced criticism over the decision to means test Winter Fuel Payments, worth up to £300. It will reduce the number of pensioners in receipt of the allowance by 10 million, from 11.4 million to 1.5 million – most of whom claim Pension Credit – saving around £1.4 billion this year.

As the State Pension increase will not be until next April, pensioners who will no longer receive a Winter Fuel Payment will still need to get by this winter. The New State Pension, for people who reached State Pension age after April 2016, should rise from £11,502 to around £11,962 annually from next April. Someone on the old full Basic State Pension would see a rise from £8,814 to £9,167 per year – an annual increase of around £353.

However, many pensioners do not receive the full State Pension and so they will not see the full cash increases. Recent analysis released by Royal London revealed only around half of people receiving the New State Pension last year were getting the full weekly amount – and around 150,000 were on less than £100 per week.

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown said: "The increase will take the full State Pension to just shy of £12,000 next year, closing in on the £12,570 personal allowance. Given that the freeze to this threshold is expected to remain in place until 2028, it raises the spectre of the full State Pension alone taking pensioners over it and into the realms of paying income tax during the next few years."

She added: "If pensions are rising with price inflation at the point when the State Pension eventually breaches the personal allowance, once tax is taken into account, retirees who get just the State Pension will actually be worse off in real terms Pensioners are already asking whether they should be in the frame for filling the gap in the public finances, and this isn’t going to quell their concerns."

Sir Steve Webb, a partner at consultants LCP (Lane Clark & Peacock), pointed out that around 8.5 million pensioners are already paying income tax, because their income is supplemented either by the old Additional State Pension/SERPS or by a private/workplace pension. He said this will mean that recently-retired pensioners on the full State Pension potentially receive an after-tax increase of £368 rather than £460.

Sir Steve, a former pensions minister, said: "Part of next April’s increase is simply to keep pace with rising prices. Based on the current inflation figure of 2.2%, the new state pension would need to rise by just over £250 simply for pensioners to stand still.

"Whilst an above-inflation increase of £460 will be welcomed, only the further £210 represents a real increase. And this is before allowing for the income tax which most pensioners will pay on their State Pension rise. Those who lose £200 or £300 in Winter Fuel Payments will therefore still be worse off in real terms next April."

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