Winter fuel payments will extend to everyone over the state pension age with an income of or below £35,000 a year, Chancellor Rachel Reeves has announced.
The Treasury said the change will cost around £1.25bn in England and Wales but still save £450m from when the universal allowance was in place.
Politics Live: Chancellor makes winter fuel announcement
Dropping the benefit for all pensioners was one of the first things Labour did in government, despite it not being in their manifesto.
The change meant only those on pension credit or other benefits were eligible – a deeply unpopular move that was widely blamed on the party’s poor performance in May’s local elections.
Ms Reeves 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.
«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.
«But we have now acted to expand the eligibility of the winter fuel payment so no pensioner on a lower income will miss out.»
The government signalled its intention to widen eligibility last month, but no detail was given on what the new threshold might look like.
The lack of clarity threatened to overshadow Ms Reeves’ spending review on Wednesday, when she will set out what funding has been allocated to each government department over the next three years.
The chancellor repeatedly faced questions on winter fuel during a speech in Manchester last week to promote a £15.6bn funding settlement for local transport projects, when she said changes would be in place for this winter.
However, ministers still could not give further detail, with science secretary Peter Kyle telling Sunday Morning with Trevor Phillips that the new eligibility would be set out «in the run up to the autumn».
It is still not clear how the new policy will be funded, with the costs to be accounted for in the autumn budget.
Asked by Sky News’ deputy political editor Sam Coates if the change is a signal to markets that she can’t say no to her MPs, Ms Reeves said after her spending review «markets and the public will be able to see public services living within their means».
‘Humiliating U-turn’
Tory leader Kemi Badenoch said: «Keir Starmer has scrambled to clear up a mess of his own making. I repeatedly challenged him to reverse his callous decision to withdraw winter fuel payments, and every time Starmer arrogantly dismissed my criticisms.
«This humiliating U-turn will come as scant comfort to the pensioners forced to choose between heating and eating last winter. The prime minister should now apologise for his terrible judgement.»
The Treasury said that by setting the threshold at an income of £35,000, over three-quarters of pensioners – around nine million people – will benefit.
The universal system meant some 11.4 million pensioners were in receipt of the benefit, which was slashed down to 1.5 million when the initial means-test was brought in.
The new threshold is above the income level of pensioners in poverty and broadly in line with average earnings, the Treasury said.
No pensioner will need to take any action as they will automatically receive the payment this winter.