Institute for Fiscal Studies report into massive review looks at the possibilities of replacing cash with vouchers and tightening criteria
The Andy Burnham government has been told that making Personal Independence Payment (PIP) means-tested could cut the costs by a third. The Institute for Fiscal Studies has released a report into potential big changes coming to the benefit in a government review.
PIP is the main benefit paid to someone who has a long-term physical or mental health condition or disability, and is intended to help with everyday tasks and extra living costs. Figures released this week show the number of people in England and Wales entitled to PIP, has climbed to a record high.
The figures come ahead of the publication later this autumn of a Government-commissioned review into the costs and operation of the disability benefits system.
The review, led by social security minister Sir Stephen Timms, branded the system “no longer fit for purpose” in its interim findings in July.
A total of 4.09 million people were entitled to claim Pip as of July 31 2026, according to data published on Tuesday by the Department for Work and Pensions (DWP).
The Institute for Fiscal Studies (IFS) report on reforming Personal Independence Payment (PIP) said: “There are no easy options for reform: all the options we discuss entail difficult trade-offs and will involve winners and losers. However, if PIP is not effectively achieving the rationales the government has for it, as the Timms Review has stated, this will only become an increasing problem if, as the official forecasts expect, the number of claimants continues to rise.”
It said the government needs to work out what it needs to achieve – whether it wants to provide resources towards those whose living standards are lower because they face the additional disability-related costs.
Alternatively does it want to promote well-being ‘it is possible that it is more effective to subsidise particular goods and services, which could be achieved by providing vouchers or in-kind support.’
The report, published by the IFS in September 2026, highlights that spending on PIP has surged from £14 billion in 2019/20 to £25 billion in 2025/26 and is forecast to reach £34 billion by 2030/31. The IFS found that the current system awards equal payments to individuals with vastly different disability severities, and set out several options for how ministers could reform PIP to control costs or better target support ahead of the government’s Timms Review.
It said that means-testing PIP by integrating PIP into Universal Credit to introduce means-testing could save up to £8.2 billion annually – 33% of current spending. The IFS said: “One unusual feature of PIP relative to other benefits is that it is not means-tested, so high-income households can claim it. If the main goal of the benefit is to reduce inequalities arising from disability, there is a good case for keeping PIP as a non-means-tested benefit. Alternatively, if greater weight is placed on ensuring that disabled people can obtain a minimum standard of living, there is a stronger argument for means-testing PIP – something recently proposed by Reform UK, though the Timms Review has indicated it will recommend keeping PIP non-means-tested.”
The IFS said restructuring PIP tiers so awards scale proportionally with disability severity would increase financial support for claimants with severe, high-cost disabilities while reducing award levels for those with mild or moderate impairments. It said: “The government may want to offer higher payments to groups of applicants for whom the assessment is more reliable, as there will be less risk that they are receiving more support than the government intends.”
The IFS said a blanket restriction ending PIP for all under-30s would save £5.5 billion annually but hit many young adults with severe conditions; targeting restrictions only at under-30s with less severe conditions would cap savings at £2.2 billion.
On replacing cash with ‘in kind’ help the IFS said: “A particular advantage of cash is that it enables claimants to choose how to spend the benefit (and they could, for example, spend it on social care or healthcare).
“It is less obvious that cash is the right form of support if the goal is to address reductions in well-being arising from disability. If cash was very effective at improving well-being, we would expect PIP recipients with high incomes to be much less likely to report low life satisfaction than PIP recipients with low incomes.”
Tightening functional criteria or capping awards for conditions such as mild-to-moderate anxiety and depression could lead to reduced payments or loss of entitlement for those specific groups.
Recycling Savings to High-Cost Claimants: Under budget-neutral scenarios, savings made by narrowing eligibility for milder conditions could be recycled to boost per-claimant awards for individuals living with the most severe conditions.
Read the full report here.
