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 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).

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.

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 remaining high, and are higher than pre-Covid-19 levels, amid the cost of living crisis.

The results from published scenario modelling 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.

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.

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.

On 28 November 2024 the Scottish Government therefore announced that the Scottish Ministers will bring forward regulations to introduce a universal PAWHP from winter 2025/26 onwards.

This will be a single annual payment of £305.10 for pension aged individuals aged 80 and over who are in receipt of relevant benefits, £203.40 for pension aged individuals below the age of 80 in receipt of relevant benefits, and £100 for households containing individuals of pension age who are not in receipt of relevant benefits.^[1]

This approach ensures that those pensioners in receipt of Pension Credit or other means-tested benefits will receive a higher amount of support, protecting their incomes. However, we also recognise that many pensioners who are above the income threshold for Pension Credit and other relevant benefits are also in need of support.

Our universal PAWHP will ensure the provision of support to all pensioner households.

The key policy aim of this new benefit is to mitigate some of the impact of additional domestic heating costs in winter by providing universal, reliable financial support to people of pension age who are more vulnerable to cold temperatures due to their age and therefore have a greater need for household heating.

SFC forecasts indicate that the universal PAWHP will support 812,000 households in 2025/26, an investment of £101 million.^[2]