A CALL by Tory former chancellor Lord Lawson of Blaby to end the tax-free treatment of the winter fuel payment to pensioners has been rejected by ministers.

At question time in the Lords, Lord Lawson said: "Will the Government seriously consider ending the anomalously tax-free status of the winter fuel payment by consolidating it into the basic state pension, which is taxable."

Pensions minister Baroness Altmann said the Government had made an "absolute commitment" that winter fuel payments would be protected up to 2020.

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Pressed about the cost of the payment, Lady Altmann said it was about £2 billion a year and it provided security for older people to give them the confidence to heat their homes properly.

The minister told peers the new state pension would be "cost neutral" for the first few decades.

Opposition spokesman Lord McKenzie of Luton said there would be "winners and losers" under the new state pension scheme, with those currently in their twenties and thirties among the losers.

He said the Government was "pocketing" up to £5 billion a year from extra National Insurance contributions due to the abolition of contracting out.

Lady Altmann said: "The reason there are 'losers' in the long run, although I wouldn't call them losers, is that we need to make the state pension sustainable and that is exactly what the new system will do."

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