Pension Age Winter Heating Payment : Island Communities Impact Assessment

Policy Background

24. In July 2016, the Scottish Government launched a public consultation which went on to inform the content of the Social Security (Scotland) Act 2018.^[8] 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 Payment (CWP) and WFPs.

25. In 2020 we launched Child Winter Heating Payment (CWHP) 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.

26. 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.

27. PAWHP was originally intended to be introduced as a universal benefit in winter 2024/25 as a like-for-like replacement of WFP. In July 2024, the Chancellor of the Exchequer announced the UK Government’s intention to restrict eligibility to WFP to those in receipt of relevant benefits. As noted above, the changes to WFP eligibility significantly reduced the Block-Grant Adjustment associated with devolution of the UK’s WFP. For the reasons set out previously, Scottish Ministers also restricted entitlement to PAWHP for winter 2024/25.

28. As noted above, Scottish Ministers had committed to expanding eligibility to ensure a minimum of £100 support is provided to all pensioner households from winter 2025/26, whilst retaining the higher rate payments for those in receipt of relevant benefits (Pension Credit, Universal Credit, income-related Employment and Support Allowance (ESA), income-based Jobseeker’s Allowance (JSA) and Income Support). This payment would have continued to be tax free.

29. The rationale for introducing a universal PAWHP was 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. Although PAWHP is not specifically targeted at rural and island communities, we are aware that these communities have higher costs.

30. Our revised PAWHP will ensure pensioner households in rural and island communities as well as across Scotland will receive vital support, with those earning £35,000 or less to receive a payment, this will ensure many pensioners including those on the lowest incomes benefit.

31. 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.^[9] Older people are also more likely to spend more time indoors according to a survey carried out by Age Scotland.^[10] 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.^[11] Older people are also more likely to live in ‘colder’ and ‘harder to heat homes’.^[12] A recent inquiry into pensioner poverty by the House of Commons Work and Pensions Committee also highlighted the health impact of fuel poverty on older people, noting older people reluctant to go into debt taking pre-emptive action which may include considerable rationing of their energy use. The inquiry further highlighting the link between cold and respiratory and heart disease and as a factor that can worsen conditions such as arthritis.^[13]

32. The 2023 Scottish House Condition Survey found that families (34%) have similar rates of fuel poverty to older households (37%), and other households (32%). When considering extreme fuel poverty, families have a lower rate of extreme fuel poverty (12%) than both older households (25%) and other households (19%).^[14] The survey also 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), 23% from the £25,000 - £34,999 income band were in fuel poverty. The fuel poverty rate for households earning between £35,000 and £44,999 annually was found to be 9%.

33. The introduction of revised eligibility to PAWHP will ensure that vital support is provided to pensioner households in most need. Payments will be made to all pensioners and then reclaimed through taxation from those with a personal income of over £35,000 per year. However, the payment amount an individual is entitled to may vary depending on whether they receive a relevant benefit^[15] - 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.

34. The policy aligns closely with the Scottish Government’s Summary of Strategic Objectives^[16], 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. The key findings published from the SHCS 2023 indicates that the median fuel poverty gap for 2023 was £1250, and therefore the re-instatement of a universal PAWHP alone is not likely to have a significant impact on fuel poverty rates but will provide a valuable contribution towards heating costs each winter.

35. 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. Analysis on the impact of the upcoming PAWHP changes on fuel poverty levels is forthcoming but it is expected that any impact on overall fuel poverty levels will be minor.

36. 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. PAWHP will contribute to that ambition, alongside our tackling fuel poverty ambition. Support is available to older people through the Scottish Government’s investment in our Council Tax Reduction Scheme as well as 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.

37. PAWHP sits alongside a wider range of initiatives to help tackle fuel poverty, such as our energy efficiency delivery programmes – Warmer Homes Scotland and Area Based Schemes – which support households living in, or at risk of fuel poverty to live in warmer homes., Additional support through Winter Heating Payment is available to pensioners in receipt of Pension Credit.

38. The Scottish Government continues to support vulnerable households through a range of actions within our limited devolved powers. This year alone, we are spending £140 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.

39. We have consistently up-rated all benefits in line with inflation, and we have now provided 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).

40. PAWHP 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.