Pension Age Winter Heating Payment: Fairer Scotland Duty Assessment

Summary of aims and expected outcomes of policy

In Winter 2024/25, Pension Age Winter Heating Payment (PAWHP) replaced the UK Government’s Winter Fuel Payment (WFP), a reserved benefit paid annually in November or December, to individuals of state pension age who are on low incomes.

WFP was originally a universal benefit paid to all those of state pension age, and PAWHP was intended to be introduced on a like-for-like basis as a universal benefit. However, on 29 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.

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).

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.

However, following the restriction of WFP eligibility and the decision to mirror this approach within PAWHP, 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 2025/26 onwards.

After careful consideration of the financial position for 2025-26 and the significant demands upon the Scottish Government’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 recognised many people who were not entitled to Pension Credit or other low income benefits also required support.

PAWHP currently provides older people in receipt of relevant benefits with additional support to help meet increased heating costs. With high energy prices continuing to be a key driver of fuel poverty, this support is particularly important given that energy prices remain high, and are higher than pre-Covid-19 levels, amid the cost of living crisis.

The results from published scenario modelling ^[1]indicate that had fuel prices remained at 2019 levels the fuel poverty rate in 2023 would be around 19% (472,000 households), a 15 percentage point reduction from the current rate. Furthermore, the extreme fuel poverty rate would be around 7.2% (184,000 households), a reduction of around 12 percentage points from current levels.

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 £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.

In contrast the 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 above the age of 80, 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. This would have been an estimated investment of £98 million in 2025/26 by the Scottish Government, compared to the £29 million for 2024/25 under the restricted approach. The compares with the revised approach decided upon by the Scottish Government for PAWHP which is estimated to be an investment of £151 million.

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.

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 have 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, with the intention that the payment would be recovered automatically, with pensioners not needing to register with HM Revenue and Customs (HMRC) or take any further action.

The policy intention is that PAWHPs are paid on a household basis. To deliver PAWHP as a household payment, for those in receipt of a relevant benefit, payments are made to a lead claimant. Entitlement for those not in receipt of relevant benefits is determined and payments made on an individual basis. Thus an amount an individual pensioner gets depends on their household circumstances. The intended payments rates are £101.70, £152.55, £203.40 and £305.10 for individuals. A typical pensioner household where the oldest person is under 80 will receive £203.40 and a household containing a person aged 80 or over will receive £305.10.

There will be exceptions to this, for example where a couple of pension age with individual incomes of £35,000 or under live with another pensioner who is in receipt of a relevant benefit. In these circumstances we will continue the approach that pensioner households have been familiar with under the previous Winter Fuel Payment (WFP) of splitting the payment, with each pensioner in the household receiving a ‘shared rate’. For those in receipt of Pension Credit or other relevant means-tested benefits, the payments are made to the relevant claimant on behalf of the household. Shared rate payments will also apply to those living in residential care who are not in receipt of a relevant means tested benefit and who meet the income threshold.

In taking the decision, Scottish Government have considered carefully 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 there will be a total investment of £151 million in 2025/26 for our revised Pension Age Winter Heating Payment, providing support to 860,000 pensioners overall, with 195,000 pensioners on higher incomes not getting the payment.^[2]

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 Winter Heating Payment (WHP) which is available to low income pensioners in receipt of Pension Credit.

The key policy aim of this new benefit is to mitigate some of the impact of additional domestic heating costs in winter by providing, reliable financial support to people of pension age who are in most need and more vulnerable to cold temperatures due to their age and therefore have a greater need for household heating. The most recent Scottish Housing Condition Survey^[3] found a strong association between fuel poverty and income, with 96% of those in the bottom income band (less than £15,000) being in fuel poverty and 58% for the second bottom band (£15,000 - £24,999). The fuel poverty rate for households earning between £25,000 - £34,999 was found to be 23%, while the levels for those earning between £35,000 and £44,999 annually was found to be 9%.

SFC forecasts indicate that the universal PAWHP will support in total 860,000 pensioners in 2025/26, with an investment of £151 million.^[4]

National Outcome

The policy aligns closely with the Scottish Government’s Wealthier and Fairer Strategic Objectives, but also links with the Scottish Government’s strategic priorities to support older people amid the cost-of-living crisis.

The policy contributes to 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 most in need of support with energy costs 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 pensioner households on lower income, are living in a warm home.
• Health: We are healthy and active. The policy will provide reassurance to older people on a lower income 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 people of pension age on lower income 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.