Rachel Reeves announced on Monday details of her U-turn on winter fuel payments.
It means that nine million pensioners will get the allowance this year, while two million will continue to miss out.
The changes to the policy mean that 7.5 million more pensioners will receive the payment of up to £300, compared to before the major U-turn which was made in the face of anger among voters and warnings it could turn into Labour’s “poll tax”.
The payments of £200 per household, or £300 per household where there is someone over 80, will be made automatically this winter to all pensioners unless they opt out.
The key figure for whether pensioners will be eligible to keep the allowance is whether they have an income of £35,000 or below.
If they do, they will get the payment.
If their income is above £35,000, which the Treasury says is the case for around two million pensioners in England and Wales, they will continue to miss out on the payment.
They will have the full amount of the winter fuel payment they received automatically collected via PAYE, or via their Self-Assessment return.
No one will need to register with HMRC for this or take any further action.
Pensioners who want to opt out and not receive the payment at all, will be able to do so, with details to be confirmed.
For pensioner couples, the new rules are slightly more complicated.
If they each have an income on or below £35,000, they will keep the full winter fuel payment.
If they are both above this level, they will lose it.
If one of them has an income of £35,000 or below, and the other has a higher income, they would get half the winter fuel payment.
Announcing the new details of the policy, 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.
“This will mean over three quarters of pensioners receiving the payment in England and Wales later this winter.”
The significant policy change will cost around £1.25 billion in England and Wales, says the Treasury which is aiming to save £450 million with the means-testing, compared to the system of universal winter fuel payments.
With Cabinet ministers engaged in eleventh-hour talks on their budgets ahead of the Spending Review on Wednesday, the Chancellor has yet to say how she will pay for the U-turn and extra costs.
