In July last year, the Labour Party was thrust into power with a sweeping majority, having campaigned under the promise of change, following 14 consecutive years of Conservative-led government.

Since then, the new administration has unveiled a raft of major reforms across education, housing and planning, healthcare - and most importantly (only slightly biased here) pensions.

Many of the government's most significant decisions were revealed in its first Budget last October, including substantial shifts in taxation, spending, and fiscal policy. But out of all the headline changes, it's arguably the move to restrict winter fuel payments - one of its first policy announcements - that has proven the most controversial.

On 29 July 2024, Chancellor, Rachel Reeves, announced that starting in winter 2024/2025, households in England and Wales would no longer be entitled to the winter fuel payment unless they received pension credit or other means-tested benefits.

For context, 10.8 million pensioners in 7.6 million households in England and Wales received the payment in winter 2023/2024.

Under the revised rules, the Department for Work and Pensions (DWP) estimated that only 1.5 million individuals in 1.3 million households would still qualify.

The cuts formed part of a wider package of measures aimed at generating immediate savings following a government spending audit, with projected savings of £1.3bn in 2024/25, rising to £1.5bn in subsequent years.

A cold reception

But the backlash was fast (and furious).

Labour's decision to means-test the benefit triggered protests from pensioners and criticism across the political spectrum – including dissent within the party's own ranks.

Public sentiment was also clearly against the move. A YouGov poll found that 59 per cent of people opposed the cuts, rising to 78 per cent among those aged 55 or older – as you might expect from a policy that directly impacted pensioners.

However, applications for Pension Credit soared ahead of the potential cut.

According to DWP data obtained via a freedom of information request by Quilter, claims rose by 51 per cent between July 2024 and February 2025 compared to the same period the previous year. Consequently, by December 2024, processing times peaked at 87 working days - far above the DWP's 50-day target.

December marked a crucial deadline, as it was the last opportunity for claims to be backdated in time to meet the cut-off for winter fuel support. Quilter described it as a "crunch" point, with a "substantial" surge in applications directly linked to the eligibility change.

The policy also reignited the wider debate about pensioner poverty.

A report from the Fabian Society, Mature Decisions: Options for alleviating pensioner poverty, estimated that 1.9 million pensioners – around 16 per cent – live in poverty. Those who retired before April 2016 on the basic state pension are particularly affected, as older rules made it harder to qualify for the full entitlement.

But even some pensioners receiving the newer state pension are "slipping through the cracks" due to high housing costs or gaps in national insurance contributions. The report concluded that the state pension remains "too low" to provide adequate support for many.

U-turn

After the local election result last month, in which Labour lost 189 council seats, criticism of the policy grew louder, with high-profile figures within the party calling for a rethink.

On 21 May, amid growing pressure, Prime Minister, Sir Keir Starmer, told MPs he was "looking again" at the £11,500 income threshold above which pensioners became ineligible for the winter fuel payment.

"I recognise that people are still feeling the pressure of the cost-of-living crisis, including pensioners," he said. "We want to ensure more pensioners feel the benefit of economic improvements as they happen."

His comments fuelled speculation that the policy would be reversed – speculation that was confirmed this week.

The Chancellor has now announced that some winter fuel payments will be reinstated in time for winter 2025, telling a crowd in Rochdale that we have “listened to the concerns that people had about the level of the means test, and so we will be making changes to that.”

She said details of the changes to the £11,500 threshold would be confirmed "as soon as we possibly can".

However, a return to a universal payment for all pensioners has been firmly ruled out.

Pensions Minister, Torsten Bell, told the Work and Pensions Committee today that such a move would be “unfair”, arguing that “95 per cent of people” agree that it’s not a good idea to have a system paying a few hundreds of pounds to millionaires.

While he didn’t reveal what the alternative may be, Bell confirmed that a revised plan will be announced in the House of Commons – potentially as part of the 11 June Spending Review.

What next?

While today's announcement will offer relief to many, it's unlikely to silence all critics.

Liberal Democrats treasury spokesperson, Daisy Cooper, said pensioners deserved an apology from the government.

"This whole debacle has caused needless misery for millions of pensioners," she said.

AJ Bell director of public policy, Tom Selby, added that the government now faces a "dilemma" in determining who should be eligible.

"One option on the table is to award the payment to everyone receiving a state pension, clawing the money back from higher-income households, potentially through their tax returns," he suggested.

Indeed, creating a new means test would be a highly complex option, but the government has not yet ruled it out.

In the meantime, pensioners will be on tenterhooks to see if they qualify for a warmer winter this year.

As always in pensions, the devil will be in the detail – and the detail is still to come.

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