Tax the winter fuel payment?

by Ed Bowsher on 11 June 2009  |  15 comments
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A House of Commons committee wants to cut back on the winter fuel payment for pensioners. Is this a good move?

A committee of MPs has said that the winter fuel payment for pensioners should become taxable and not be paid at all to pensioners who are on the higher rate of income tax.

According to The Times: 'Around 2.9 million pensioners currently receive the payments, currently worth £250 for over 60s or £400 for over 80s. However, only 12% of recipients are in fuel poverty - where one tenth or more of income goes on fuel bills.'

If you read my post, 'Time to act on the pensions timebomb', you might be expecting me to back the MPs' recommendation. But I'm not so sure. Stopping the benefit to higher-rate taxpayers amounts to means-testing. If you have to fill out a form to claim the benefit, I fear that the folk who really need the money won't claim.

I reckon we should either leave things as they are or abolish the payment and fold the money into the Basic State Pension. The advantage of sticking with the winter payment is that pensioners get a cash top-up at a time of the year when they need one. On the other hand, merging with the payment with the basic pension makes things simpler. That's normally a welcome move.

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