Pension Age Winter Heating Payment: Business and Regulatory Impact Assessment

Business and Regulatory Impact Assessment (BRIA): Pension Age Winter Heating Payment

Purpose and Intended Effect

1. A Business and Regulatory Impact Assessment is used to analyse the cost and benefits to businesses and the third sector of any proposed legislation or regulation, with the goal of using evidence to identify the proposal that best achieves policy objectives while minimising costs and burdens as much as possible.

Background

2. In July 2016, the Scottish Government launched a public consultation which went on to inform the content of the Social Security (Scotland) Act 2018. This legislation provided Scottish Ministers with the legislative power to deliver new Winter Heating Assistance in Scotland, with the intention of replacing the UK Government’s Cold Weather Payments (CWP) and Winter Fuel Payments (WFP).

3. In 2020 we launched Child Winter Heating Payment (CWHP, previously known as Child Winter Heating Assistance) which extended eligibility for WFP to help mitigate the additional heating costs that the households of the most severely disabled children and young people face in the winter months.

4. In February 2023, we launched Winter Heating Payment (WHP), replacing CWP in Scotland with a guaranteed payment each winter, targeting low-income households who have additional need for heat, including households with young children, disabled people and older people, providing stable, reliable support every winter.

5. Pension Age Winter Heating Payment (PAWHP) was originally intended to be introduced as a universal benefit in winter 2024 as a like-for-like replacement of the UK Government’s WFP. However, in July 2024, the Chancellor of the Exchequer announced the UK Government’s decision to restrict eligibility to WFP to only those in receipt of relevant benefits. The changes to WFP eligibility reduced the Block-Grant Adjustment (BGA) associated with devolution of the UK’s Winter Fuel Payment by £147 million in 2024/25, over 80% of the cost of the Scottish Government’s replacement benefit. Given this significant reduction in budget, after careful consideration of options the Scottish Government took the difficult decision to mirror the restricted eligibility of WFP for PAWHP.

6. For winter 2024/25, PAWHP was therefore introduced mirroring the decision to deliver WFP to those of pension age in receipt of relevant benefits. The relevant benefits included Pension Credit, Universal Credit, Income-related Employment and Support Allowance (ESA), Income-based Jobseeker’s Allowance (JSA), Income Support, Working Tax Credits and Child Tax Credits (CTC).

7. The timing of the UK Government announcement, and the lack of consultation or discussion with the Scottish Government, meant it was not practicable for the Scottish Government to deliver PAWHP in winter 2024/25. PAWHP was therefore delivered on behalf of Scottish Ministers by the Department for Work and Pensions under an agency agreement. This approach sought to ensure that eligible individuals in Scotland continued to receive support over winter 2024/25.

8. PAWHP currently provides older people in receipt of relevant benefits with additional support to help meet increased heating costs during the winter. With high energy prices continuing to be a key driver of fuel poverty, this support is particularly important given the high energy prices amid the cost-of-living crisis.

9. Under the restricted eligibility criteria for winter 2024/25, PAWHP provided older people with a payment of either £200 or £300 depending on their age if they received Pension Credit, Universal Credit, income-related Employment and Support Allowance (ESA), income-based Jobseeker’s Allowance (JSA), Income Support, Child Tax Credit or Working Tax Credit.

10. The Scottish Government has consistently acknowledged that other people of pensionable age may also face financial difficulties and would benefit from this vital support. For this reason, on 28 November 2024 the Scottish Government announced that it will bring forward regulations to introduce a universal PAWHP from winter 2025/2026 onwards.

11. On 9 June 2025, the UK Government announced that they would reverse their earlier decision and will now bring forward legislation that, from winter 2025 onwards, will expand WFP eligibility to pensioners with an individual income of £35,000 or less per year. The payment would be £200 per pensioner household with no individual over 80 or over, or £300 per pensioner household with an individual aged 80 or over. This was expected to increase the amount of pensioners eligible to receive the WFP in England and Wales from 1.5 million to 9 million.

12. In contrast a universal PAWHP for winter 2025-26 would have provided £203.40 to pensioners in receipt of relevant benefits below the age of 80, £305.10 for those in receipt of relevant benefits aged 80 or over, and £100 for pensioner households not in receipt of relevant benefits, with regulations laid before the Scottish Parliament on 6 June 2025 introducing this change.

13. The UK Government decision was announced with no prior engagement with the Scottish Government, and Ministers and Officials within Scottish Government worked to understand the implications of the UK Government decision. Following careful consideration of the options available, the Scottish Government decided to mirror the approach for our PAWHP, with payments being made to all pensioners, and will be automatically recovered through taxation from those pensioners with a personal income of over £35,000 per year. This tax charge will be introduced through separate legislation brought forward by the UK Government.

14. The payments of £305.10 and £203.40 would lead to pensioners in Scotland being better off compared to those in the rest of the UK. The Scottish Government has also started discussions with the UK Government to extend the proposed arrangements in England and Wales to recover payments from those pensioners with an individual income of more than £35,000 through the tax system. The intention is that payments would be recovered automatically, with pensioners not needing to register with HMRC or take any further action.

15. In taking the decision, Scottish Government have carefully considered the importance of prioritising the additional funding available to those who need it most. This approach will ensure that a higher level of support will be provided to those most in need, with over 720,000 Scottish pensioners estimated to benefit from the higher payment in the revised PAWHP who would have otherwise received a lower payment. The Scottish Fiscal Commission (SFC) estimates that the Scottish Government will invest £151 million in 2025/26 for our revised Pension Age Winter Heating Payment, providing support to 860,000 pensioners in total^[1], with 195,000 pensioners on higher incomes not getting the payment.^[2]

16. SFC figures shows that this investment compares with £98 million in our initial planned approach for 2025/26 before the UK Government announcement of June 2025 and the £29 million spending in 2024/25 on PAWHP in the restricted approach delivered via an agency agreement with the DWP.^[3] Our new PAWHP will be an additional investment from the Scottish Government of £1 million above the BGA funding for 2025/26 with BGA funding increasing by £120 million to £150 million in total.^[4]

17. The Scottish Government is committed under the ‘Fairer Scotland for Older People’ strategy to seek to ensure the financial security of older people in Scotland. This extension in eligibility for PAWHP to those earning £35,000 or less will contribute to that ambition together with a wider range of initiatives to mitigate fuel poverty, such as our energy efficiency delivery programmes – Warmer Homes Scotland and Area Based Schemes – which have supported over 155,000 households living in, or at risk of fuel poverty in the past decade, as well as our Islands Cost Crisis Emergency Fund which helps island authorities support their island communities through cost-of-living pressures. Support is also available through the Scottish Welfare Fund, which provides vital support to households struggling to meet their housing and energy costs as well as through WHP which is available to low-income pensioners in receipt of Pension Credit.

18. Support in addition to social security payments, and the support mentioned above, is available through the Scottish Governments investment in our Council Tax Reduction Scheme and free bus travel for all older people over the age of 60 in Scotland. The Scottish Government has also provided over £2 million from our Equality and Human Rights Fund, supporting older people’s organisations to deliver work focused on tackling inequality and enabling older people to live independent and fulfilling lives. The former Minister for Climate Action also secured the agreement of energy suppliers to participate in a working group aimed at co-designing a social tariff, the output of which was sent to the UK Government – who has the power to deliver this policy – in March 2025.

19. The regulation of the energy market and the fundamental levers to make a real difference remain with the UK Government. However, the Scottish Government continues to support vulnerable households through a range of actions within our limited devolved powers. This year alone, we are spending £140 million on activities to mitigate UK Government policies through schemes such as Discretionary Housing Payments and the Scottish Welfare Fund. In addition, our Winter Heating Payment which, in contrast to the UK Governments Cold Weather Payment, guarantees a reliable annual payment which is up-rated each year to people on low-incomes, including those pensioners in receipt of Pension Credit each winter, regardless of temperature levels in winter. In winter 2025/2026 the payment value is £59.75.

20. We have consistently up-rated all benefits in line with inflation, providing certainty to recipients of Scottish Government social security benefits and put more money in their pockets by making it a legal requirement to annually up-rate all devolved benefits including our Winter Heating benefits (Child Winter Heating Payment, Winter Heating Payment and Pension Age Winter Heating Payment).