**Thousands of Pensioners May Miss Out on £300 Winter Fuel Payment Due to ‘Modest’ Savings Under New DWP Rules**
New Department for Work and Pensions rules could see many older people in the UK miss out on the £300 Winter Fuel Payment this year, with ‘modest’ savings now potentially putting them above the qualifying income threshold. The changes, which are taking effect in the coming months, have sounded alarm bells among pensioners’ groups and financial experts alike.
The Winter Fuel Payment, traditionally aimed at helping pensioners cover the rising cost of heating their homes during the colder months, is being reassessed under tighter eligibility criteria after a recent revision by the Labour government. This year, an estimated nine million state pensioners were expecting this support. However, under new guidance, those whose savings and resulting interest income push their annual total taxable income over £35,000 could find themselves excluded.
A particular concern has been raised regarding how savings interest is treated under these new rules. Coventry Building Society has warned that even standard savings accounts, which may appear unremarkable, could inadvertently tip some pensioners over the new income threshold. Interest generated on savings, unless held within an Individual Savings Account (ISA), is considered taxable income, regardless of whether it falls within the Personal Savings Allowance and is untaxed.
Jeremy Cox, Head of Strategy at Coventry Building Society, explained the risk in straightforward terms: “Thousands could still unknowingly be left out in the cold – not because they’re earning more, but because their savings are.” He stressed that pensioners may not realise their interest from non-ISA savings counts toward their total income. With interest rates relatively high compared to previous years, even a moderate nest egg could produce enough income to make someone ineligible for the Winter Fuel Payment.
Financial advisers are urging pensioners to review their accounts and consider how different types of savings products may affect their DWP assessment. Alice Haine at Bestinvest drew attention to the new £35,000 limit as a “tax cliff-edge,” warning, “Those whose income hovers around the limit may need to consider small adjustments to avoid missing out. Sometimes just a minor tweak would mean the difference between receiving the payment or not.” She suggested that pensioners should pay close attention to all sources of income used in government assessments and not overlook any savings interest, however modest.
According to former pensions minister Sir Steve Webb, this change could have lasting effects. Quoting government data, he noted that around two million pensioners are currently just above the new income threshold. “That number could rise by half a million by 2030 if inflation and interest rates continue on their current trajectories,” he said. Webb also pointed out that this approach may be one way governments use changes in inflation to gradually raise additional revenue without explicit tax rises.
There have been calls for better communication from the Department for Work and Pensions and financial institutions to prevent pensioners from falling foul of the rules through lack of understanding. Advocates recommend that those uncertain about their situation seek advice or consult online calculators provided by well-known banks or impartial advisory services.
One practical solution being championed is for savers to switch additional funds into ISAs, which allow all interest to accrue tax-free, thus not contributing to the income calculation for benefit eligibility. “Using ISAs could be a simple but effective way to ensure savings don’t inadvertently affect important entitlements,” Mr Cox advised.
With the cost of living crisis continuing to impact many older households and energy prices forecast to remain high, losing access to the Winter Fuel Payment could be a significant financial blow to many. Charities warn that the situation is likely to worsen in coming years if more pensioners slip over the new threshold and lose out on help at the coldest time of the year.
As the revised regulations roll out, both pensioners and their families are advised to stay informed and take proactive steps to protect their entitlements. Observers anticipate further scrutiny of the policy in Parliament, particularly as the potential impact becomes clearer in the winter months ahead.
For regular updates on benefit changes, subscribing to reputable financial newsletters or joining community groups could prove invaluable. In the meantime, many pensioners are left to scrutinise their statements – and possibly reconsider their financial arrangements – in the hope of keeping much-needed support.