Pension Age Winter Heating Payment: Fairer Scotland Duty Assessment

Summary of assessment findings

Universal vs Restricted Approach vs Payments for those earning £35,000 or less.

Prior to the UK Government’s decision to restrict WFP eligibility to those in receipt of relevant benefits, the Scottish Government had intended to introduce PAWHP as a universal benefit.

Within our public consultation, there was strong support for universal eligibility. Four fifths (80%) of respondents agreed with the universal approach, 14% disagreed, and 6% were unsure. Among organisations who answered, 81% agreed and 19% disagreed. However, some stakeholders disagreed and called for the benefit to be targeted more effectively at those in fuel poverty. Some stakeholders also advocated for a form of means testing of PAWHP, as it was argued that not all older people need this financial support, with a suggestion that alternative or additional income-based eligibility criteria could be used to identify and target the payment.

Following the UK Government’s decision to restrict entitlement to WFP to those in receipt of relevant benefits, the Scottish Government made the difficult decision to mirror the UK Government’s decision and restrict eligibility for PAWHP to older people on relevant eligible benefits for winter 2024/25.

Under the current restricted eligibility, Pension Credit is the main qualifying benefit for PAWHP. Take-up of Pension Credit has been historically low. It is estimated that in 2019/20, up to £1.7 billion of Pension Credit was not received by people eligible for it.^[25] Scottish Government analysis estimates that approximately 193,322 individuals are currently eligible for Pension Credit in Scotland. The analysis suggests that 125,659 individuals in Scotland are in receipt of Pension Credit, while an estimated 67,000 individuals in Scotland are not receiving the Pension Credit they are entitled to.

The Cabinet Secretary for Social Justice urged the DWP to undertake a benefit take-up campaign for Pension Credit and to move forward with plans for a social energy tariff to provide the right and fair support for some of the most vulnerable energy consumers across the whole of Scotland. While Scottish Ministers have no formal role in the administration of reserved benefits, the First Minister wrote to councils and COSLA seeking their urgent assistance to promote the take-up of Pension Credit, which is the main qualifying benefit for older people to receive a PAWHP under the current restricted eligibility criteria.

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 initial approach of universal eligibility to the 2023 SHCS data, we estimated that around 865,000 households to be in fuel poverty. The universal approach would therefore have reduced the number of households in fuel poverty against the current restricted criteria by 5,000, when compared to 2023 levels using the means-tested PAWHP criteria. Analysis on the impact of PAWHP changes on fuel poverty levels is forthcoming but it is expected that any impact on overall fuel poverty levels will be minor.

Similarly, the 2023 SHCS, estimated that 491,000 households were in extreme fuel poverty under the original WFP eligibility, prior to the introduction of means-testing in 2023. This is expected to have increased to around 501,000 households under the means-tested PAWHP. Conversely, we estimated a decrease to 495,000 households under the universal PAWHP eligibility proposal. Therefore, the introduction of a universal PAWHP would have moved around 6,000 households out of extreme fuel poverty compared to the current PAWHP criteria. Analysis on the impact of PAWHP changes on fuel poverty levels is forthcoming but it is expected that any impact on overall fuel poverty levels will be minor.

Distributional analysis from the Office of the Chief Economic Advisor^[26] suggests that the latest policy is progressive – both in comparison to the qualifying benefit policy and the universal policy in place before 2024. When compared to the qualifying benefit policy, households in the first eight income deciles are better off with the bottom half of the income distribution gaining over £100 on average. When compared to the previous universal policy, the greatest impact is on higher-income pensioner households. As a result, the average pensioner household sees a 0.09% reduction in income. However, pensioner households in the lowest three deciles see a small increase in household income due to uprating. Households with a disabled member benefit slightly more than the average household in comparison to the qualifying benefit policy. However, the impact is broadly similar to the average when compared to the universal policy.

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 forecasted that over 812,000 households will receive PAWHP in 2025/26.^[27] Their most recent forecasts suggest that in total 860,000 individual pensioners will receive the revised payment of PAWHP following our recent announcement with a forecast investment of £151 million.^[28][29]

Eligibility for PAWHP continues to be linked to the individual’s age and their circumstances during the qualifying week. A person will be eligible if, during the qualifying week (the third full week in September), they are of state pension age.

The new approach won’t restrict eligibility due to qualifying benefits only; payments will be made to all pensioners and then reclaimed through taxation from those with a personal income of over £35,000 per year. Although the payment amount an individual is entitled to may vary depending on whether they receive a relevant benefit, someone in receipt of a relevant benefit will receive the highest payment amount for their age group (either £203.40 or £305.10). If they receive the relevant benefit as part of a joint claim, only the lead claimant will receive a payment. For clients in receipt of a relevant benefit, their payment value is not impacted if they live with other pensioners who are not in receipt of a relevant benefit.

Household composition will be taken into consideration when determining payment amount. Generally, a household with individuals who are state pension age but under 80 will receive £203.40, while households with an individual over 80 will generally receive £305.10.

The following table outlines possible scenarios for an individual to understand their level of payment based on different household compositions and their age.

Payment value may be different if the client or their partner get one of the following benefits:

• Pension Credit
• Income-based Jobseeker’s Allowance (JSA)
• Income-related Employment and Support Allowance (ESA)
• Income Support
• Universal Credit

Where someone receives Pension Credit, for example, (either individually or jointly) a single payment to the lead claimant will be made and this will always be the maximum value available for the age bracket of those in that claim, acknowledging that they have a lower income and therefore may require additional support.

Care home residents will get the payment unless they are on Pension Credit or other relevant benefit, as many people receiving those benefits already get care and accommodation costs met by their local authority and thus do not qualify for PAWHP.

For those not eligible, these payments will be automatically recovered through taxation from those pensioners with a personal income of over £35,000 per year, however this tax charge will be introduced through separate legislation brought forward by the UK Government and will not be brought forward within The Winter Heating Assistance (Pension Age) (Scotland) Amendment Regulations 2025.

Our revised approach ensures that support is provided to those most in need.

Potential impact of increasing payment value

The consultation also considered the value of the payment.

A range of views were expressed with 56% of individuals who answered agreeing with retaining the payment values then in pace under universal WFP, whilst 28% disagreed and 16% were unsure. Half (50%) of organisations who answered agreed, the remaining 36% disagreed and 14% were unsure.

The most common theme in responses to this question was that the payment should increase as the cost of fuel and energy increases or that the benefit values should rise in with inflation. Most disagreed with the payment values then in place under universal WFP for this reason; however, a few respondents agreed with the current value but still called for future payments to match any changes in fuel costs. Some also highlighted increased payment value for those on low incomes (e.g. those in receipt of Pension Credit).

Within responses from our Experience Panel, some suggested that 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]

The 2024/2025 payments of PAWHP were £200 for individuals aged below 80 who were in receipt of relevant benefits, and £300 for those over 80 in receipt of relevant benefits.

In recognition of the pressure on household budgets, the value of PAWHP will be up-rated annually. The Scottish Government has consistently up-rated all benefits in line with inflation, and we have provided certainty to recipients of Scottish Government social security benefits and put more money in their pockets by making it a legal requirement^[31] 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).The revised PAWHP policy for 2025/26 will provide support to those most in need. The payments of £203.40 or £305.10 have been uprated with inflation.

Impact of the qualifying week

Eligible clients for PAWHP are identified and paid automatically if they meet the qualifying criteria during the qualifying week in September.

Within the public consultation on PAWHP, the majority of respondents agreed with our proposal to continue having the qualifying week in September (71% overall, 71% of individuals and 82% of organisations agreed with this approach).

Those who disagreed with the proposals instead suggested multiple qualifying weeks throughout the winter or that there should be no qualifying week and that eligibility should be assessed throughout the year. These were suggested primarily to address concerns that people who turn state pension age following the qualifying week in September but during the winter will miss out on support in that initial year.

However, it is important that we maintain the qualifying week currently in place for PAWHP in September, as this enables the DWP to provide the data required to establish entitlement and provides sufficient time between the qualifying week for DWP to provide client data and for the relevant household matching to be done by Social Security Scotland, to ensure the right value of payment is given to the right person. This enables clients to be identified before the beginning of the winter period, ensuring that they are notified early and paid in winter. The work involved and the scale of the task means that late September is the latest possible date for establishing entitlement in order to make payments in time.

Continuing to use the ‘qualifying week’ currently in place for PAWHP, the week beginning with the third Monday in September of any given year, is appropriately associated with a winter payment and would be consistent with the qualifying week used for CWHP and the UK Government’s WFP.

Timing of payment

We understand the importance for clients receiving money towards energy costs earlier in the winter, allowing them to budget accordingly. For households that are off-gas grid, or whose energy is supplied via a prepayment meter, it is also important that they receive the payment earlier in the winter to support paying for the fuel in advance.

PAWHP is currently paid automatically to eligible recipients during the winter period, making payments into individuals’ bank accounts.

Scottish Ministers are committed to considering how we could improve PAWHP for people who are off-gas grid. The 2023 Scottish House Condition Survey^[32] estimates that approximately 108,000 off-gas-grid households were in fuel poverty in 2023, representing a fuel poverty rate of 38%. In 2023, off-gas-grid properties had similar levels of fuel poverty to those on the gas grid. However, off-gas-grid properties had higher levels of extreme fuel poverty, with 76,000 off-gas-grid households in extreme fuel poverty, representing an extreme fuel poverty rate of 27%, compared to 18% of properties on the gas grid.

During our consultation on Low Income Winter Heating Assistance (LIWHA)^[33] (now WHP), we heard that people paying for fuel in advance found it was helpful to receive a payment earlier in the winter as fuel costs can increase as demand increases during the colder winter months.

Similarly, within the PAWHP consultation, many respondents advocated for the payment to be made earlier, highlighting that households in these areas may need or prefer to bulk buy fuel in the summer or autumn when prices are cheaper. There were calls for payment in October or early November, rather than late November or December.

Respondents suggested that this particular group could be prioritised for earlier payments to ensure they received the payment as soon as possible in the winter period. This would allow for them to buy the relevant fuel as early as possible in the winter period, where costs may be lower. As this group have to buy fuel in advance, it would allow them to put their PAWHP towards the cost of a bulk order earlier in the winter.

We have considered the current evidence available, including research that is available in the House of Commons library based on WFP delivery.^[34]

Making advance payments potentially requires moving the qualifying week to earlier in the year for all recipients, or for a sub-set of recipients who meet defined criteria for an earlier payment.

Early payment to all recipients would effectively define a new qualifying week for eligibility, which would need to be earlier than it currently is, which breaks the link with the intention of the support being delivered in winter.

Automatic payment to off-grid households as a sub-set of recipients would be dependent upon a mechanism being available to identify affected claimants. This is not considered practicable due to the difficulty in identifying whether an individual is living in an off-grid property. Alternatively, an application-based delivery for off-gas grid recipients could be developed, however, the cost of publicising the scheme, processing applications, and verifying eligibility would entail additional costs.

Identifying these groups within the current caseload in order to make payments earlier, or to make a payment of higher value, would require significant systems development and increased expenditure which will not be possible this winter. Any increase in value would have to be met from within the fixed Scottish Budget and would therefore require significant costing and impacting.

While it is clear that there are ways in which delivery could be improved for these communities, any changes introduced at this stage would bring considerable complexity and additional cost. As with all social security benefits, we will undertake a post-implementation evaluation. This will inform any future consideration of variations to policy or delivery arrangements.

Difference of support available for groups with similar needs

The Scottish Government acknowledges that people of pensionable age may also face financial difficulties during the winter months, with some requiring more support than others. The Scottish Government aims to provide support to those most in need and we are continuing to take action to support older people and tackle poverty.

Under the current qualifying criteria for PAWHP, the initial proposal for the introduction of a universal PAWHP it had been identified that this would lead to a higher level of support for people of state pension age in receipt of relevant benefits.

The Scottish Government aims to provide support to those most in need. As outlined above, elderly individuals on low incomes are among the most vulnerable to cold winter temperatures. The maintenance of a payment for those in receipt of relevant benefits will continue to protect their incomes. However, we also recognise that many pensioners who are above the threshold for Pension Credit and other relevant benefits are also in need of support. Our revised PAWHP will ensure the provision of support to pensioner households, by extending eligibility to those earning £35,000 or less and increasing the number of households supported by the payment.