Pension age winter heating payment: business 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 those in receipt of relevant benefits. The changes to WFP eligibility reduced the Block-Grant Adjustment 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 include 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 provides older people with a payment of either £200 or £300 depending on their age if they receive 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 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. From winter 2025/26 onwards, PAWHP will be paid to all pensioner households with a higher amount paid to those on means-tested benefits. Pensioners in Scotland in receipt of a relevant qualifying benefit, such as Pension Credit, will receive payments of £203.40 or £305.10 depending on their age, and universal payments of £100 will be provided to every other pensioner household not in receipt of relevant benefits.^[1]

12. After careful consideration of the financial position for 2025/26 and the significant demands upon the SG's budget, following the UK Government’s Autumn budget, and confirmation of associated budget in Scotland, Scottish Ministers worked at pace to consider options for delivery of Pension Age Winter Heating Payment in winter 2025/26, as well as mitigations available for winter 2024/25. Scottish Ministers considered the finance available, and concluded that payments at a rate of £100 to those pensioner households not in receipt of a relevant benefit was affordable, and would go some way to supporting those households towards meeting their heating bills throughout the winter. This approach recognises many people who are not entitled to Pension Credit or other low income benefits also require support.

13. 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. A universal PAWHP 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 150,000 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.

14. 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 Minister for Climate Action 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

15. 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 £1210 million on activities to mitigate UK Government policies through schemes such as Discretionary Housing Payments and the Scottish Welfare Fund, which provide vital support to households struggling to meet their housing and energy costs. In addition, our WHP 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 2024/2025 the payment value was £58.75 and has been uprated ahead of winter 2025/2026 to £59.75.

16. We have consistently up-rated all benefits in line with inflation, and our intention now is to provide 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).

Rationale for Government Assistance

17. The rationale for introducing a universal PAWHP is to provide all pensioner households with additional support to meet increased heating costs during the winter, with the intention of helping them to heat their homes for longer. This universal benefit will deliver support across Scotland’s older people as we had always intended to do before the UK Government decision to cut the payment. A universal payment will ensure all pensioner households receive support, whilst protecting those on low incomes by providing a higher amount of support for those on means tested benefits.

18. Pensioner households are likely to have a greater need to keep their home warm due to being older and it being harder for them than younger people to regulate their body temperature.^[2] Older people are also more likely to spend more time indoors according to research carried out by Age UK.^[3] We know that living in a cold home can be detrimental to many older people and that reduced muscle mass and poorer circulation can have an impact on the ability to stay warm. This can impact on the immune system, amplifying any pre-existing condition.^[4] Older people are also more likely to live in ‘colder’ and ‘harder to heat homes’.^[5]

19. The 2023 Scottish House Condition Survey found that families (34%) have similar rates of fuel poverty to older households (37%), and other households (32%). However, other households have lower rates of fuel poverty than older households. When considering extreme fuel poverty, families have a lower rate of extreme fuel poverty (12%) than both older households (25%) and other households (19%).

20. The introduction of universal eligibility to PAWHP will ensure that vital support is provided to all pensioner households. The higher payment value for those in receipt of relevant benefits will ensure that those pensioners most in need of support will continue to receive a higher rate of payment, protecting their incomes. However, there are many pensioners who have not taken up their Pension Credit entitlement, or are just above the income threshold for Pension Credit and other relevant benefits, but are still in need of support. Analysis from DWP has shown that take-up of Pension Credit is around 65%. The Scottish Government estimates there could be 68,000 people in Scotland eligible for Pension Credit but not currently claiming it, and therefore currently miss out on PAWHP under the current eligibility rules. The Scottish house condition survey estimated that around 861,000 households were fuel poor in 2023.^[6] The introduction of universal entitlement to PAWHP will ensure that pensioners who miss out on PAWHP under current eligibility will receive vital support under a universal PAWHP, as well as providing some support to pensioner households currently experiencing fuel poverty.

21. The policy closely aligns with the Scottish Government’s Wealthier and Fairer Strategic Objectives, but also links with the Scottish Governments key priorities to tackle fuel poverty, ensuring financial security in older age as well as supporting people through the cost-of-living crisis

22. The policy will contribute towards the following National Outcomes:

• Economy: We have a globally competitive, entrepreneurial, inclusive and sustainable economy. This policy will provide continued investment in financial support for older people, with enhanced support for those on low incomes in Scotland.
• Communities: We live in communities that are inclusive, empowered, resilient and safe. This additional support recognises older people have particular needs in relation to heating and will help towards ensuring all pensioner households, including those on low incomes, are living in a warm home.
• Health: We are healthy and active. The policy will provide reassurance to older people that they will receive a contribution towards their heating costs, helping to maintain a safe temperature at home during the winter, reducing the health risks due to living in cold environments.
• Human Rights: We respect, protect and fulfil human rights and live free from discrimination. Social Security is a human right and through expansion of this benefit we help progress the support that is available.
• Poverty: We tackle poverty by sharing opportunities, wealth and power more equally. The policy intention of PAWHP is to provide financial support to all people of pension age in Scotland because they have a greater need for heat during the winter months. PAWHP in particular specifically targets pensioner households who, due to their age, may require an enhanced heating regime, and therefore may incur greater energy costs (around one million older people living in Scotland every year).

Consultation

23. Prior to the UK Government decision to restrict eligibility of WFP, we consulted on our policy proposals for PAWHP as a universal payment. Our public consultation on PAWHP ran between 23 October 2023 and 15 January 2024. We consulted on our policy proposals for the introduction of a universal benefit. The purpose of the consultation and associated stakeholder engagement was to gather views on the proposed delivery, eligibility criteria, the proposed payment format, to collect additional evidence for those who will receive PAWHP in rural and off-gas grid communities, and to identify any unintended consequences of introducing the new payment including the impact of expanding eligibility to this benefit on businesses and key stakeholders.

24. Given the UK Government’s late change in policy and the lack of prior consultation with the Scottish Government, to ensure payments were made to pensioners in Scotland in winter 2024/2025, it was not possible to consult further on the proposed eligibility changes to PAWHP prior to laying regulations for a restricted PAWHP.

25. Similarly, following the Cabinet Secretary’s announcement on 28 November, given the timescales for legislating and delivery, it has not been possible to consult further on these proposals. However, we know from our previous consultation there was broad support for maintaining the universal approach to eligibility for all who have reached state pension age, with 80% of all respondents in favour of this approach.^[7] However, some stakeholders disagreed, with five organisations calling for the benefit to be targeted more effectively at those in fuel poverty. This was on the basis that any savings could provide additional funding to support other fuel poverty initiatives. Many respondents also argued a universal approach is fairer, avoids discrimination, promotes uptake and meets everyone’s basic need to stay warm.^[8]

26. During our public consultation on PAWHP, some individuals commented on the potential impact on energy companies. Some people recognised energy companies could benefit as a result of PAWHP as people are likely to be able to pay their bills on time, stating that otherwise these businesses may lose out due to non-payment.

Social Security Experience Panels Survey

27. We also invited members of our Social Security Experience Panels for their views on the key policy considerations for PAWHP alongside the public consultation.

28. Many suggested PAWHP should be provided for people with disabilities, extending coverage through lowering the eligible age for those with disabilities and, for those who are unable to work due to a disability. Some also suggested a universal payment without age limits.

29. Some respondents suggested island communities should receive a higher value payment to reflect the higher heating costs and weather conditions costs incurred with island or rural life, and widening eligibility to cover all households that were off-gas grid, including disabled or vulnerable households, or assessing cases on an individual basis.

30. Almost all (91%) survey respondents agreed that PAWHP should continue to be provided as a one-off payment each winter. Those in support stated it would help with advance planning for the winter months and would help with budgeting decisions over the Christmas period.

Options

Option 1 – do nothing

31. The Scottish Government has consistently recognised that there are many individuals who are above the Pension Credit threshold, and who are therefore not eligible to either Pension Credit or PAWHP, who would benefit from this support.

32. This option would mean that PAWHP eligibility would continue to be based on someone being of state pension age and receiving a relevant benefit. As illustrated above, we know that Pension Credit, which is the qualifying benefit with the largest caseload, has a very low take-up rate (around 65%). Scottish Government analysis estimates that approximately 68,000 individuals in Scotland do not receive the Pension Credit they are entitled to.

33. The 2023 SHCS includes the 2023 criteria for WFP prior to the introduction of restricted eligibility, and estimates that 861,000 households were in fuel poverty in 2023. This rises by around 10,000 to 871,000 when the current, means-tested PAWHP approach is applied to the 2023 data. When applying the proposed approach of universal eligibility to the 2023 SHCS data, we would estimate around 865,000 households to be in fuel poverty. The universal approach would therefore reduce the number of households in fuel poverty under the current criteria by 5,000, when compared to 2023 levels using the means-tested PAWHP criteria. In winter 2024/2025, it was not possible to extend eligibility to PAWHP due to the timing of the UK Government’s decision to restrict WFP eligibility, the lack of prior consultation with the Scottish Government, and the significant reduction in budget. However, for winter 2025/26, due to the increase in fuel poverty levels under restricted PAWHP eligibility and the impact on pensioners not eligible for relevant benefits, the option to retain current eligibility was not taken forward.

Option 2 – re-introduce universal PAWHP as per previous universal WFP policy

34. This option would mean a full re-instatement of the payments at a value of £200 or £300 as previously provided under the WFP, and as we had intended to deliver in winter 2024/25, prior to the UK Government’s announcement to restrict eligibility.

35. Initial analysis of this option indicated that based on the Block Grant Adjustment we expected to receive in future years to deliver PAWHP (£31 million in 2025/26 and £30 million in 2026/27), that an additional £153-£155 million would be required to be found from within the Scottish Budget to deliver this.

36. Given the ongoing financial pressures, this option was not affordable and therefore was not progressed further.

Option 3 – re-introduce universal payments, providing £100 per pensioner household not in receipt of a relevant benefit

37. This option re-instates universal payments at a lower rate than was provided previously through universal WFP which ended in winter 2023/24. This ensures all pensioner households receive a contribution towards their energy costs each winter, in line with our commitment to ensuring financial security for older people.

38. Based on the Scottish Fiscal Commission’s December forecasts, it is expected this will be an investment of around £101 million in the first year (2025/26), providing support to approximately 812,000 households.^[9]

39. Distributional analysis undertaken indicates that household income in the lowest three income deciles will increase by 0.6%, 0.5% and 0.3%, reflecting that most pensioner households will be £100 better off, and that has a larger impact – as a proportion of income - for households on lower incomes.

40. Within the consultation, although there was broad support for universal eligibility, some stakeholders disagreed, with five organisations calling for the benefit to be targeted more effectively at those in fuel poverty. This was on the basis that any savings could provide additional funding to support other fuel poverty initiatives.

41. We know there may be individuals who feel that they do not require PAWHP. Under our plans, clients will be able to opt out of our universal PAWHP if they do not wish to receive it. To opt out of a payment, clients will first need to be on the Social Security Scotland systems. For this reason, for the first year of launch clients will not be able to opt-out until after Social Security Scotland has received and processed client data from DWP. From year two onwards, Social Security Scotland will have the data available to manage client opt-outs.

Sectors and groups affected

42. In consulting on the original policy intent of introducing PAWHP on a universal basis, we considered the potential impact on businesses and organisations that have a particular focus on the following:

• organisations supporting older people
• welfare rights organisations
• advice giving organisations
• energy advice and support organisations

43. Prior to the change in policy in 2024, stakeholders and organisations were invited to consider the impact of the proposed policy intent, both on their organisations, as well as on any client groups they support. We met with key stakeholders during the consultation to discuss our proposals prior to the UK government’s decision to restrict WFP eligibility, and the Scottish Government’s subsequent decision to mirror this approach.

Costs

44. The UK Government’s decision to restrict WFP eligibility to those of pension age in receipt of relevant benefits reduced the Block Grant Adjustment funding by £147 million for 2024-2025. The Scottish Government will receive around £31 million in Block Grant Adjustment funding for the delivery of PAWHP in 2025/2026, with additional expenditure to be met from within the Scottish Budget.

45. The Scottish Fiscal Commission (SFC) has a statutory duty to provide independent and official forecasts of Scottish GDP, devolved tax revenues and devolved social security expenditure. The Protocol for engagement between the SFC and the Scottish Government notes that the SFC may produce forecasts where it considers the policy, or policies, to have a "non-negligible impact on receipts or expenditure". Having considered the measures in the 28 November announcement, the SFC forecast that 812,000 households will receive PAWHP in 2025-26.^[10] The SFC forecasts that the total spending on PAWHP will be around £101 million in 2025/26, rising to around £104 million by winter 2028/29.^[11]

46. The payments are not restricted to payment of energy costs and therefore other sectors may also benefit from the investment.

Scottish Firms Impact Test

47. There may be some impact on businesses and third sector organisations operating in Scotland in relation to the way the Social Security Scotland agency delivers the devolved benefits compared to DWP.

48. For PAWHP, the demands placed on third sector organisations and independent advocacy services to provide advice and support for people receiving and enquiring this payment may change slightly. There may be confusion amongst clients about eligibility or payment rates due to the policy changes which have taken place for this benefit in recent times. However, clear communications material will be developed ahead of delivery, and given the automated and universal nature of the benefit, this should not require provision of complex advice.

Competition Assessment

49. The Scottish Government does not believe that PAWHP will have an adverse impact on the competitiveness of businesses or the third sector in Scotland, the UK, Europe, or the rest of the world. PAWHP does not directly or indirectly limit the number of suppliers, nor does it limit the ability of suppliers to compete or reduce suppliers' incentives to compete vigorously. Additionally, the Scottish Government does not expect there to be any significant impact on the operational business of local authorities or health boards as a result of introducing this provision.

Competition Assessment Questions

I. Will the measure directly or indirectly limit the number or range of suppliers?

No

II. Will the measure limit the ability of suppliers to compete?

No

III. Will the measure limit suppliers' incentives to compete vigorously?

No

IV. Will the measure limit the choices and information available to consumers?

No

Consumer Assessment and Adherence to the Consumer Duty

The Consumer Duty

50. As of April 2024, the ‘Consumer Duty’ has replaced the ‘Consumer Assessment’ section of the BRIA. This is a statutory duty introduced by the Consumer Scotland Act 2020 which came into force on 1 April 2024.^[12] It places a duty on relevant public authorities in Scotland, including the Scottish Government, to improve the extent to which consumers are considered in strategic decision-making.

51. A key principle of the Duty is to ensure all public bodies are working towards improving outcomes for consumers as part of their strategic decision-making process.

52. The Scottish Government has a duty when making decisions of a strategic nature about how exercise their functions, to have regard to:

• the impact of those decisions on consumers in Scotland;
• the desirability of reducing harm to consumers in Scotland.

Requirements on relevant public authorities

The Act sets out four requirements on relevant public authorities:

• when making decisions of a strategic nature, have regard to the impact those decisions have on consumers;
• when making decisions of a strategic nature, have regard to the desirability of reducing harm to consumers;
• publication of information about the steps taken to meet the duty;
• having regard to this guidance.

53. The Scottish Government does not believe that the introduction of universal eligibility to PAWHP will have an adverse impact on either eligible people or any other consumer.

54. PAWHP does not directly or indirectly limit the choices of consumers. Nor does it impact on decisions made on consumers in Scotland, or limit the ability of consumers to compare the quality, availability or price of goods or services in a market. Furthermore, PAWHP will not impact a consumer's ability to understand their rights.

55. Consumer Assessment questions considered:

I. Does the policy affect the quality, availability or price of any goods or services in a market?

No

II. Does the policy affect the essential services market, such as energy or water?

No

III. Does the policy involve storage or increased use of consumer data?

Yes. With the introduction of universal eligibility, the amount of client data required to administer the benefit will increase.

IV. Does the policy increase opportunities for unscrupulous suppliers to target consumers?

No

V. Does the policy impact the information available to consumers on either goods or services, or their rights in relation to these?

No

VI. Does the policy affect routes for consumers to seek advice or raise complaints on consumer issues?

No

Test run of business forms

56. We foresee no need for new business forms as a result of this policy.

Legal Aid Impact Test

57. The right to appeal to a the First-tier Tribunal (Social Security Chamber) is provided for in the Social Security (Scotland) Act 2018. Civil legal aid will continue to be available to individuals to appeal an entitlement decision to the Upper Tribunal, Court of Session or Supreme Court.

58. The Scottish Government expects the impact on the Legal Aid budget to be minimal as a result of the introduction of universal eligibility to PAWHP. Current recipients are already able to access legal aid to appeal entitlement decisions. Given that the majority of the caseload for this assistance will be paid automatically, the number of manual applications is expected to be fairly low. Due to the variation in payment rates between those in receipt of relevant benefits and other households not in receipt of relevant benefits, there may be an increased number of appeals from those who may dispute the level of payment they receive, however we do not anticipate the numbers to be significant.

Enforcement, sanctions and monitoring

59. The Scottish Government has established the Scottish Commission on Social Security (SCoSS), an independent body that will scrutinise the Scottish social security system (including benefit regulations) and hold Scottish Ministers to account. As part of their function, they will examine the regulations required for the administration of a universal PAWHP and will produce reports setting out their observations and recommendations in relation to the proposals. These reports will be submitted to Scottish Ministers, the Scottish Parliament and made available to the wider public as required by the duty conferred on Scottish Ministers by section 97 of the Social Security (Scotland) Act 2018.

60. The Social Security (Scotland) Act 2018 places a duty on the Scottish Ministers to publish an annual report on the performance of the Scottish social security system during the previous financial year. The report is to describe what the Scottish Ministers have done in that year to meet the expectations on them set out in the charter.

61. Monitoring the impact of the PAWHP will be a continuous process and where any unintended consequences are identified, we will consider what steps can be made to minimise any negative impact.

62. We will collate management information to monitor the characteristics of recipients and will undertake qualitative research to evaluate whether PAWHP is meeting its policy intentions. This will inform any future consideration of variations to policy or delivery arrangements.

Implementation and delivery plan

63. A communications strategy is under development, which will aim to ensure that individuals, the third sector, local government, and advice providers are aware of the revised eligibility of PAWHP, as well as understanding how and when recipients will receive the payment.

64. We anticipate regulations will be laid before Parliament on 6 June 2025 and, subject to parliamentary approval, come into force on 3 October 2025.

65. From winter 2025/2026, Social Security Scotland will make PAWHP payments to clients.

Post-implementation Review

66. As with all social security benefits, we will carry out an evaluation following the delivery of the benefit to evaluate whether PAWHP is meeting its policy intentions.

Summary and Recommendation

67. The Scottish Government’s primary consideration is always about providing the right level of financial support to those who are entitled to it. However, it is also important to consider deliverability, affordability and to what extent changes might result in increased spending.

68. As noted, the Scottish Government receive funding from the UK Government through the Block Grant Adjustment. It is anticipated that the Scottish Government will receive around £31 million towards PAWHP via the Block Grant Adjustment in 2025/26, which reflects the UK Government’s restricted policy. The Scottish Fiscal Commissions forecast published in December 2024 estimates that a universal PAWHP will require an investment of around £101 million in 2025/26, meaning the Scottish Government will need to invest around £70 million over and above the funding received through the BGA. This additional funding will need to be met from the Scottish Budget.

69. Based on affordability and deliverability considerations laid out above and working towards our goal of ensuring financial security for older people,^[13] the Scottish Government intends to introduce a universal PAWHP for winter 2025/26 to ensure all pensioner households are supported with their energy costs during winter.

Declaration and publication

70. I have read the Business and Regulatory Impact Assessment, and I am satisfied that:

a. it represents a fair and reasonable view of the expected costs, benefits, and impact of the policy, and

b. that the benefits justify the costs.

71. I am satisfied that the impact on consumers has been considered as required by the Consumer Scotland Act 2020 and the impact on business has been assessed with the support of businesses in Scotland.

Signed on the original

Date: 3 June 2025

Minister’s name: Shirley-Anne Somerville

Minister’s title: Cabinet Secretary for Social Justice

Scottish Government Contact point: winterbenefitspolicy@gov.scot