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MP Paul Burstow says savings could be used to help people with "horrendous care bills"
Winter fuel payments should be means-tested to help pay for care of the elderly, a former minister says.
A report by Lib Dem MP Paul Burstow and the Centre Forum think-tank, said targeting the allowance would help pay for a fairer social care system.
The report said it could fund most of the £1.7bn cost of implementing reforms of elderly care in England proposed by the independent Dilnot Commission.
Health Secretary Jeremy Hunt said a funding model was yet to be decided.
The Dilnot Commission, which was set up by the government, recommended that the cap on the amount individuals have to pay towards their social care be set at £35,000 over a lifetime.
The commission argued that such a move would protect people from catastrophic care costs that result in them having to sell their homes.
End Quote Michelle Mitchell Age UKWe appreciate that the country is facing difficult financial times , but we must be careful that the wider implications for older people of any potential source of funding are fully considered"
As things stand, older people in England have to pay for their care costs if they have assets of more than around £23,250. Similar systems exist in Wales and Northern Ireland, but in Scotland personal care is provided free.
Under the proposals from Mr Burstow and the Centre Forum, the cap on the amount people should pay towards social care costs would be set at £60,000 but the amount of assets people could hold would rise to £100,000.
They said winter fuel allowance should be limited to those receiving pension credit.
Pension credit takes into account savings and income, and only the poorest retired people qualify to receive it.
The move would save £1.5bn a year and mean about three-quarters of current recipients would lose the allowance, which is worth between £200 and £300 per household, Mr Burstow's report explains.
The report also proposed ending the relief on capital gains tax at death. This would raise another £600m a year, it said.
A trade offMr Burstow, the former care services minister, said: "Social care isn't free, but it could be a lot fairer for those who have worked hard all their lives.
"By concentrating the winter fuel payment on those eligible for pension credit, we can pay for a cap on care costs."
He said there were 100,000 pensioners with incomes of more than £100,000 a year and questioned whether it was "right" to continue to pay them winter fuel allowance as many of them admitted to using the money for other things.
Michelle Mitchell, of Age UK, said introducing a cap on social care costs would "lift one of the great fears of becoming older".
But she urged caution over taking away other benefits from the elderly.
"We appreciate that the country is facing difficult financial times, but we must be careful that the wider implications for older people of any potential source of funding are fully considered.
"Until the government sets out concrete proposals it is difficult to assess what the overall impact would be on older people. "
The suggestion that winter fuel payments should be targeted comes amid rising controversy about the allowance. At present, people born on or before 5 July 1951 are entitled to the cash.
Last week, Conservative minister Nick Hurd said well-off pensioners should consider giving their winter fuel payments to charity.
Several other MPs have also said the better-off should not get age-related universal benefits in future.
But David Cameron has insisted he is committed to retaining them.
Mr Hunt said: "We still have a long way to go if this country is going to be one of the best places in Europe to grow old.
"There is no doubt capping costs - the principle recommended by Dilnot - is the best model. The key question is how to fund it sensibly given the current deficit.
"We are looking at how to achieve this, along with taking action to ensure people do not have to sell their homes to pay for care."
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