Budget 2026 made no change to how War Pension and AFCS payments count in means tests

What the Budget said, and did not say

The Chancellor delivered the Budget on 28 October 2026, and the Treasury published the Budget document on gov.uk at 1.30pm. We searched it, its table of policy decisions, its policy costings and its analysis of the impact on households for War Pensions, the Armed Forces Compensation Scheme, war widows and veterans. None of them mention any of these. The only compensation scheme in the Budget is the Infected Blood Compensation Scheme.

The Budget does change Pension Credit, but not on this. It adds prompts for claimants to re-declare the capital they hold, and removes entitlement from offenders detained in hospital who are convicted of the most serious violent and sexual offences. Nothing in it changes how a war disablement pension or a Guaranteed Income Payment is counted.

So the rules stand as they were. Universal Credit ignores a war disablement pension and an AFCS Guaranteed Income Payment in full, and Pension Credit ignores £10 a week of either and counts the rest as income.

We have not heard of any other announcement so far. As at 28 October 2026, DWP, the Treasury and the MOD had published nothing new on it, and nothing has followed the Defence Secretary's comment on 19 October that he is "looking at" the issue. No review or costing has been announced either, which was campaigners' fallback ask.

What MPs and the Royal British Legion asked for

The Andover Advertiser reported on 22 October that Kit Malthouse, the Conservative MP for North West Hampshire, has "joined cross-party calls for the Chancellor to exclude veteran compensation from means tests" ahead of the Budget. He told the paper: "It's ludicrous that military compensation can be treated as 'income' when calculating benefits, while civil awards such as personal injury are typically exempt."

The same day, Claire Hazelgrove, the Labour MP for Filton and Bradley Stoke, said in a post on X that she was writing to the Chancellor to back the campaign, and added: "I hope the Chancellor will make this change at the Budget next week." Babarinde told the Commons on 14 October that MPs from Labour, the Conservatives, the Liberal Democrats, the Greens, Alliance, the Ulster Unionists, the DUP and others have signed his cross-party letter. The letter itself has not been published.

Behind all of this is the Royal British Legion. Its campaign page says military compensation is "unfairly counted as normal income when applying for many welfare benefits", contrasts that with civil compensation awarded by courts, which it says is exempt, and ends: "We urge the UK Government to change the law. It should act to ensure military compensation is not counted as income by means tests."

The numbers being quoted

The figures in circulation do not all match, so treat them as campaign estimates rather than settled facts.

• How many receive compensation. The Legion's campaign page says 150,000 veterans and their families. Babarinde quoted the charity in the Commons as saying some 144,000, and the Andover Advertiser also used about 144,000.
• How many could get Pension Credit. The Legion estimates 146,000 veterans are eligible for it.
• How many are affected. Babarinde told MPs that 4,120 veterans and bereaved spouses receive military compensation and would be claiming Pension Credit, and that on average they can be denied around £5,900 a year in direct and passported support. Hazelgrove attributes both figures to the Legion. We have not found either in a Legion publication.

Pauline's law

On 14 October Babarinde presented the Armed Forces Compensation Scheme and War Pension Scheme (Report) Bill, which he calls Pauline's law after Staff Sergeant Pauline Cole, his constituent, who served during the Aden emergency in 1967 and died in November 2025. He told MPs that her Pension Credit fell from £77 a week to £11 after she was awarded compensation.

The bill would require the government to report to Parliament on the merits of disregarding these payments in Pension Credit and other means-tested benefits. It would not change the rules itself. An identical bill was introduced in January 2026 and fell without being debated when Parliament was prorogued that spring. The new one is a presentation bill, its text has not been printed, and Parliament's bill record lists its second reading for Friday 27 November 2026.

How the rules work today

Whether a War Pension or AFCS award counts depends on the benefit, and on whether it is a regular payment or a lump sum. The campaign is about the regular payments: the weekly war disablement pension, and the AFCS Guaranteed Income Payment (GIP).

The £10 is a flat cash sum written into the regulations. It does not rise each April, while the awards do, so it protects a smaller share of the payment every year.

Several payments are already ignored in full for Pension Credit: Constant Attendance Allowance, the War Pensioners' Mobility Supplement, the exceptionally severe disablement element and Armed Forces Independence Payment. AFCS lump sums are treated as personal injury capital, and Pension Credit disregards that capital with no time limit.

That is why Pension Credit is the focus. A veteran on Universal Credit has the whole award left out of account. At state pension age, on Pension Credit, the same award counts as income apart from £10 a week, with nothing else about their circumstances changed.

What the government has said

Answering Babarinde's adjournment debate on 14 October, Torsten Bell, the pensions minister, who holds posts at both the Department for Work and Pensions and the Treasury, was direct: "the Government are not in a position to change the regulations." He called it "a long-standing position", and said it is "about the consistency of how the benefit system deals with a very large and growing number of compensation payments".

His reasoning ran along four lines:

• Pension Credit is a minimum income guarantee. "In pension credit, most income is taken into account, because the benefit is intended to top up the retirement income that a person already has."
• The military schemes are already treated more favourably than similar schemes. He pointed to the £10 disregard and the full disregard for AFIP and specific war pension additions, and said industrial injuries disablement benefit is counted in full for Pension Credit while the fire and police schemes get no disregard.
• The real disagreement is about regular payments. AFCS lump sums are treated as personal injury capital, the same as civilian awards, he said, while "ongoing war pension scheme payments, and guaranteed income payments under the armed forces compensation scheme, are income payments. That is the fundamental point on which there is probably disagreement."
• Universal Credit is different by design. It "was introduced with no partial disregards", while Pension Credit predates it and kept the partial disregard structure of the older benefits.

Labour's Mark Sewards asked whether the rules fall foul of the Armed Forces Covenant. The minister said DWP "is content that this is consistent with our obligations under the armed forces covenant". Babarinde had argued that the covenant duty is being extended to central government, including welfare benefits, and comes into force early next year.

None of this is new. DWP said in writing in July 2025 that there were "no plans to change" how War Pensions and AFCS awards interact with means-tested benefits, and the same minister gave the Commons a similar answer in March 2026. That was the government's position two weeks before the Budget, and the Budget did not change it.

Five days later the Defence Secretary struck a different note. Asked at Defence questions on 19 October whether he would work with DWP to end the deduction, Wes Streeting said: "I recognise the challenge raised by the right hon. Member. That is something I am looking at." We have not heard anything further from him on it so far. Our post on the Defence Secretary's comments covers what that does and does not commit to.

Who would gain if the rules changed

Who benefits would depend on how far a change went, and none has been announced. On today's rules, these are the groups the £10 limit affects:

• Veterans on Pension Credit, or refused it, who receive a war disablement pension or an AFCS Guaranteed Income Payment. This is the group campaigners focus on. Because Pension Credit tops income up to a guaranteed minimum, compensation counted as income largely reduces it pound for pound.
• War widows and widowers, whose War Widow's or Widower's Pension gets the same £10 in Pension Credit. Campaigners talk about veterans and bereaved spouses, but whether a change would include them is one of the details to check.
• People claiming Housing Benefit or Council Tax Reduction, if a change reaches them. Councils run these, and many already choose to ignore military compensation in full. The Legion found in late 2022 that four in five councils counted it as income, and says it has since worked with more than 50 councils to change that.
• People still on Income Support, income-based JSA or income-related ESA, which apply the same £10 and are being replaced by Universal Credit.

Who would not be affected

• Universal Credit claimants. Universal Credit already ignores War Pension and AFCS payments in full.
• Your AFPS service pension. It is an occupational pension, not compensation, and counts in full in every means test. In the debate the Liberal Democrat MP Caroline Voaden raised veterans whose service pensions reduce their Universal Credit, but that is a separate issue and the bill does not cover it.
• AFIP and the allowances already ignored in full, such as Constant Attendance Allowance and the Mobility Supplement for Pension Credit.
• Lump sums. AFCS lump sums are already treated as personal injury capital. The time limits on that disregard, 12 months on Universal Credit and 52 weeks on working-age Housing Benefit, are a separate rule. The asks made public so far are about compensation counted as income.

What comes next

With nothing in the Budget, the position the pensions minister set out on 14 October stands. These are the next things to watch:

• Pauline's law, 27 November 2026. Babarinde's bill is listed for second reading that day. It would require the government to report on the merits of disregarding these payments, but it would not change the rules itself.
• The Defence Secretary's "looking at". If it becomes a review, a costing or a joint announcement with DWP, we will add it here.
• A costing. Babarinde's fallback ask was for the government at least to cost a full disregard. He told MPs DWP has said it has not done that work, and the Budget did not commission it.
• The detail of any change. The £10 is written into DWP regulations, so a change would need amending regulations and a start date. Look for which benefits and which payments it covers, including war widows' and widowers' pensions, and whether anything is backdated.

A Budget has been used for this kind of change before. The 2016 Budget committed to disregarding War Pension Scheme payments to veterans in English care charging, and that disregard took effect in April 2017. This Budget did not follow that route for benefits.

What to do in the meantime

• Claim on today's rules. The Budget changed nothing, so if you are entitled to Pension Credit now, there is no reason to wait.
• Ask your council in writing whether it ignores military compensation for Housing Benefit and Council Tax Reduction. The Legion's Credit their Service page has a council map based on Freedom of Information responses.
• Give DWP the breakdown of your award, not just one weekly total, because several War Pension allowances are already ignored in full.