Although this decision offers relief to many older people and eases some fears of rising pensioner poverty, it comes with a hefty £1.25bn price tag – sparking concerns about potential tax increases or cuts to other public services later this year.
Yet while around nine million pensioners gain a reprieve, a number of other vulnerable groups may be left struggling.
All state pensioner households will get a payment of up to £300 automatically. The payment will be £200 per household, or £300 per household where there is someone over 80.
If you individually earn over £35,000 per year, the payment will be clawed back through the tax system.
Who will miss out?
Those earning slightly above the threshold
Rachel Vahey, head of public policy at AJ Bell, said those who are asset-rich but cash-poor could get the payment.
square WINTER FUEL PAYMENT Pensioners missing out on winter fuel payments will rise by 500,000 by 2030
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She said: “Someone with a house worth £150,000 and a £36,000 income would have the payment taken away, whereas someone with a £3m house and a £30,000 income would get to keep it.”
Haine said: “In these instances, if their taxable income skims just above the £35,000 threshold, losing that winter fuel payment can have a detrimental impact on cash flow in the winter months.”
Other campaigners added that the amount may not be enough for those in real poverty.
Some people have complained that workers earning under £35,000, who are under pension age, are not receiving support towards their energy bills and this is unfair.
For couples, it will be individual income that counts – not household income. For those not claiming pension credit (or other benefits), the payment will be split, with each person getting £100, £150 or £200 – up to a total of £300.
This could lead to some households potentially looking to ensure they have a slightly lower income in order to benefit from the payment.
As the payment is based on individual income rather than household income, single pensioners, like those who have been widowed, could miss out as they may now be receiving a lower pension income than they were in the past.
She explained: “A house will still cost the same to heat and water, and home insurance bills may only come in slightly cheaper or even remain the same, so it can be more expensive to run a home on just one pension income.
“If you look at the recent Pensions and Lifetime Savings Association calculations for how much income people need in retirement, a couple wanting a moderate lifestyle need an income of £43,900, but this does not halve for a single person – they still need £31,700.
“This illustrates that the loss of one full income is not compensated by an equal reduction in costs.”
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