The government has confirmed it will reverse its policy on cutting winter fuel payments to pensioners.
Winter fuel payments will be restored for three-quarters of pensioners in England and Wales, Rachel Reeves has announced.
Around 7.5 million more pensioners who missed out on the payment of up to £300 last year will now get it, following a sustained backlash.
The decision ends weeks of deliberation from the Keir Starmer’s government about a possible U-turn, with details of plans to reverse the winter fuel payment cut for pensioners originally expected to not be revealed until closer to the autumn.
But on Monday, the chancellor Rachel Reeves confirmed that any pensioner with an income of under £35,000 a year will get the payment automatically - around three-quarters of all pensioners.
Reeves declined to apologise for implementing the cut in the first place, telling ITV News it would have been "irresponsible... to allow the public finances to carry on on an unsustainable footing". She said Labour had "listened to people’s concerns" as she announced the changes.
What is the winter fuel payment?
The winter fuel payment is a tax-free annual payment designed to help pensioners cover heating costs during colder months, traditionally ranging from £200 for households with someone aged 66-79 to £300 for those with someone over 80.
Before 2024, it was automatically paid to all pensioners, benefiting around 11 million people.
However, after Labour won the general election in July last year, it introduced means-testing, limiting eligibility to those on pension credit or other means-tested benefits, reducing recipients to about 1.5 million to save an estimated £1.4-1.5bn annually, amid what the government claims is a £22bn deficit.
What has Rachel Reeves announced?
Speaking on Monday, Reeves said the winter fuel payment reversal was "a tough decision, but the right decision".
She said: "Targeting winter fuel payments was a tough decision, but the right decision because of the inheritance we had been left by the previous government."
However, she has stood by still means-testing the payment.
"It is also right that we continue to means-test this payment so that it is targeted and fair, rather than restoring eligibility to everyone including the wealthiest," she continued.
"But we have now acted to expand the eligibility of the winter fuel payment so no pensioner on a lower income will miss out.
"This will mean over three-quarters of pensioners receiving the payment in England and Wales later this winter."
Questioned on whether she would apologise for causing "unnecessary anxiety and hardship", Reeves fell short of saying sorry.
The chancellor told ITV News: "The irresponsible thing to have done last year was to allow the public finances to carry on on an unsustainable footing.
"That would have resulted in interest rates going up, costing families and pensioners more in mortgages and rents."
She added: "I’m always going to put stability in our economy first."
Who is eligible?
Under the previous rules, only pensioners born on or before 23 September 1958 receiving pension credit or other means-tested benefits, such as universal credit or income support, qualify for the winter fuel payment, targeting those with incomes below £11,800. For pensioner couples, this figures stands at £18,023.
Pensioners must also live in England, Wales or Northern Ireland. Scotland has a different system.
However, under the new proposals, any pensioner earning £35,000 or less will be eligible, covering the costs of around 75% of pensioners.
Sarah Coles, head of personal finance, Hargreaves Lansdown, said: "The partial U-turn on the winter fuel payment will make a huge difference to the finances of some of the lowest-earning pensioners, who had missed out by a hair’s breadth by earning fractionally too much to qualify for pension credit.
"They will now be able to budget for a warmer winter and a less painful squeeze on their finances as the cold nights draw in.
"They’ll also be getting a warm glow from the fact they may have a couple of small cuts in the energy price cap to look forward to between now and then, which should make for a more comfortable winter all round."
But others, such as Alex Clegg, an economist at the Resolution Foundation, have claimed the latest changes risk adding too much complexity to the system.
He said: "This U-turn doesn’t represent a return to the status quo. The new means-test will create new complexity in the tax system, including a cliff-edge for those with around £35,000 of income."
He added: "The real question is why it is now a priority to pay winter fuel payments to over three-quarters of pensioners, with almost half of the new beneficiaries in the richest half of the population, when previously it was judged that only one in ten needed support."
When will the winter fuel payment be made?
Winter fuel payments are typically distributed between November and December each year to help pensioners manage heating costs during peak winter months.
The changes will now apply 2025-26 winter season, resuming support for the hardest hit households in the the coldest months, with pensioners already eligible under current rules due to receive payments at the current times.
Critics, including Conservative leader Kemi Badenoch, have warned that delays could worsen the financial strain for vulnerable households.
And Tory shadow work and pensions secretary Helen Whately has demanded a Government "apology" to pensioners who lost the winter fuel payment last year.
Speaking in the House of Commons, she said: "Did they think they could just try out new policies like you try a new mattress - unwrap it, see how it feels, sleep on it for a while, but if it causes a political backache, send it back?
"This rushed reversal raises as many questions as it answers."
Money saving expert Martin Lewis praised the threshold change, calling the news "a big improvement".
Simon Francis, coordinator of the End Fuel Poverty Coalition, said that while the Chancellor has "seen sense", the government "must focus on how it supports all households in fuel poverty".
He said: "Axing the Winter Fuel Payment for so many pensioners was a cruel cut to make.
"Millions of pensioner households faced unaffordable energy costs last winter.
"While the changes will provide some relief to these households, there will still be pensioners unable to afford the high cost of energy and living in cold damp homes.
"So now the government must focus on how it supports all households in fuel poverty and implements the long term measures needed to bring down the cost of energy for good."
How much will it cost?
When the cut to winter fuel payments was originally announced last year, ministers hoped to pocket an annual saving of up to £1.5bn.
But this figure is now set to be slashed as millions more pensioners are brought back into the fold and made eligible to claim the benefit once more.
According to officials, the cost of restoring the payments is estimated to be worth about £1.25bn.
However, they still hope to save £450m per year compared with the price tag of the original scheme covering all pensioners.
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