How wealthy pensioners struggle to opt out of the winter fuel payment

Only 186 of more than 11 million recipients of the winter fuel payment successfully opted out of the benefit last season, a freedom of information request has revealed, prompting calls for an overhaul of the benefit.

The figures suggest 0.002 per cent of those who are eligible – anyone born before 25 September 1956, regardless of income or accumulated wealth – returned the extra cash in 2021, a 78 per cent drop from the year before, according to data obtained from the Department for Work and Pensions (DWP).

Although the payment is a critical financial lifeline for a large portion of the estimated 11.4 million recipients every year, the Office for National Statistics (ONS) classifies more than one in five pensioners as a millionaire for whom the payment may not be so crucial.

Regardless, the benefit is paid every year to all over-65s, including those who report that they don’t need it and that it should be used to extend help to the poorest especially in light of the current energy crisis.

High-profile recipients include Sir Alan Sugar whose previous attempts to return the money reportedly proved impossible. He eventually donated the money to charity instead.

Others have also taken matters into their own hands, including the Somerset Community Foundation, whose Surviving Winter campaign provides a mechanism, for those who can, to donate part or all of their payment to others facing fuel and other forms of poverty.

The amount of winter fuel payment received per person ranges from £100 and £300 and is designed to specifically help pay energy bills in winter. The exact amount depends on your age and whether other people in your household also qualify.

Although figures are not available for how many winter fuel payments were made in either the 2020-21 or 2021-22 tax years, in the winter of 2019-20 11.4 million people received the winter fuel payment.

The government recently committed to expanding the warm homes discount which will mean the value of the household rebates will rise from £140 to £150.

“It is perfectly understandable that people do not go out of their way to opt out of this social security payment,” accepts Ian Browne, retirement planning specialist for wealth manager Quilter – which made the information request.

“Why turn down free money? However, we are facing one of the worst cost of living crises many will have faced in their lifetime and the government is already financially overstretched due to its pandemic response and will be looking at every possible way to save money.

“There are certainly more than 186 pensioners in the UK who are not reliant on the winter fuel payment.”

According to the most recent data from the DWP, the proportion of retirees receiving other, income-related, benefits has fallen from 37 per cent in 1995 to 20 per cent in 2021.

Almost all pensioners received the state pension in 2021, up from 94 per cent in 1995, while occupational pension income was received by 66 per cent of pensioners that year, up significantly from 57 per cent in 1995 and 60 per cent in 2010.

Private pension income was received by 74 per cent of retirees last year – more than all previous years since the data began being collected - and more than one in 10 pensioners continues to receive an income from paid work.

And in the latest report examining households with below average income, the DWP noted that: “Around three-quarters of pensioners live in homes that are owned outright (compared with roughly one in five of working-age adults), and so face minimal housing costs.”

Even former work and pensions secretary Iain Duncan Smith has previously suggested that wealthy pensioners should consider opting out of the payment.

But that’s far easier said than done. In fact, Browne speculates that the relative uplift in the number of people successfully opting out in 2020-21 – 846 people – could have been a result of having more time during the pandemic restrictions to navigate an opt out.

“The government could look at ways to make this process easier for people and redistribute to those in society who, even with this payment, will continue to struggle,” he says.

“The recent council tax rebate policy illustrates that the government can formulate ways to give targeted help to those less well off in society. This social security payment needs to be more smartly distributed so that more funds can be freed up to support other pressing issues for low-income pensioners.”