Pension Age Winter Heating Payment: Fairer Scotland Duty assessment

Summary of assessment findings

Universal vs Restricted Approach

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, 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.^[23] 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 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.

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 would estimate a decrease to 495,000 households under the proposed, universal PAWHP eligibility. Therefore, the introduction of a universal PAWHP would move around 6,000 households out of extreme fuel poverty compared to the current PAWHP criteria.

Analysis from the Office of the Chief Economic Advisor suggests that the proposed introduction of universal eligibility to PAWHP is likely to increase household income for pensioner households by 0.24%. The impact is estimated to be greater among single households, with household income increasing by 0.32% for single males, and by 0.33% for single females. In line with the rise to household income for all pensioner households, the introduction of universal PAWHP is expected to increase household income for pensioners with disabilities by 0.24%.

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.^[24]

The SFC forecasts that the total spending on PAWHP will be £101 million in 2025/26. This compares to the forecasted spending of £32 million under the current restricted eligibility in winter 2024/25.^[25]

The introduction of universal eligibility to PAWHP will provide support to all pensioner households, who are likely to be on fixed incomes and may not otherwise be able to afford to keep their heating on for longer during the winter months.

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.^[26]

It is anticipated that the Scottish Government will receive £31 million via the Block Grant Adjustment in 2025/26, which reflects the UK Government’s restricted policy. Remaining funding for a universal PAWHP will be met from the fixed Scottish Budget. The Scottish Fiscal Commissions forecast published in December 2024 suggests that a universal PAWHP will be an investment of £101 million in 2025/26. Any further increase in value would also have to be met from within the fixed Scottish Budget.

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

The revised policy of universal PAWHP will extend the current payments by providing all pensioner households with support during winter. This policy will continue to provide payment to those who are in receipt of relevant benefits, at values of £203.40 and £305.10 depending on age, but for pensioner households not in receipt of a relevant eligible benefit, a payment of £100 per household will be made. Whilst this will not replace in full the previous level of support provided through universal WFPs, Scottish Ministers have had to consider affordability of the value of payments, particularly because the Block-Grant Adjustment associated with delivery of PAWHP has decreased significantly due to the UK Government’s decision to restrict WFPs, and therefore any further increases in value would have to be found from within the fixed Scottish Budget.

By providing a higher value of payment to those in receipt of means-tested benefits, this policy ensures that a higher level of targeted support continues for this group. In addition, the universal payment of £100 per pensioner household not in receipt of relevant benefits, will ensure that support is provided to all pensioner households during the winter months.

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 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).

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 early 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 November or December, making payments into individuals’ bank accounts just before the coldest winter weather is likely.

Scottish Ministers are committed to considering how we could improve PAWHP for people who are off-gas grid. The 2023 Scottish House Condition Survey^[27] 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 LIWHA^[28] (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.^[29]

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, and under the introduction of a universal PAWHP from winter 2025/26 onwards, it has been identified that the provision of a higher level of support to those of state pension age in receipt of relevant low income benefits results in different support depending on age.

Given the cross-over with entitlement for pensioners in receipt of Pension Credit who already receive WHP, these individuals will now be eligible for an additional benefit with a higher payment rate for those on low incomes, which is not available to other recipients of WHP, such as those who are not of pension age on low incomes and who have a young child or someone disabled within the household.

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