Pension age winter heating payment: island communities impact assessment

Pension Age Winter Heating Payment: Island Communities Impact Assessment (ICIA) 2025

Introduction

1. The importance of island-proofing was recognised in the "Empowering Scotland's Island Communities prospectus" published in June 2014. The principle of island-proofing is one of building a broad-based islands awareness into the decision-making process of all parts of the public sector.

2. The Islands (Scotland) Act 2018^[1] (‘2018 Act’) places a duty on the Scottish Ministers and other relevant authorities, including a number of public authorities, to have regard to island communities in exercising their functions, and for the Scottish Ministers this will also include the development of legislation. This duty is often referred to as 'island-proofing'. The Scottish Government is also committed to island-proofing the legislation required in support of the devolution of social security powers to Scotland.

3. If the Scottish Ministers are of the opinion that any piece of proposed legislation is likely to have an effect on an island community which is significantly different from its effect on other communities, then the duty to island-proof legislation requires the Scottish Ministers to:

• describe the likely significantly different effect of the legislation
• assess the extent to which the Scottish Ministers consider that the legislation can be developed in such a manner as to improve or mitigate for island communities, the outcomes resulting from the legislation; and
• set out the financial implications of steps taken under this subsection to mitigate, for island communities, the outcomes resulting from the legislation.

Executive Summary

4. This ICIA has considered the potential effects of introducing universal eligibility to Pension Age Winter Heating Payment (PAWHP), and how this policy might impact people living in island communities.

5. PAWHP currently provides older people in receipt of relevant benefits with additional support to help meet increased heating costs during the winter. With high energy prices continuing to be a key driver of fuel poverty, this support is particularly important given energy prices remaining high amid the cost of living crisis.

6. PAWHP was originally intended to be introduced as a universal benefit in winter 2024/25 as a like-for-like replacement of Winter Fuel Payments (WFP).

7. In July 2024, the Chancellor of the Exchequer announced the UK Government’s intention to restrict eligibility of 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.

8. 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).

9. 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.

10. 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.

11. 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.

12. From winter 2025/26, all pensioner households not in receipt of relevant benefits will therefore receive a minimum of £100^[2] of support, with those in receipt of a relevant low income benefit^[3] and aged under 80 receiving £203.40 and those aged 80 or over in receipt of a relevant benefit, or whose partner in a joint claim has reached that age, receiving £305.10. Having considered the measures of the November 2024 announcement, the latest SFC forecast indicates that a universal PAWHP is expected to support 812,000 households in winter 2025/26, with an investment of £101 million in the first year.^[4] This is an increase from the expected 137,000 households forecast to receive support for winter 2024/25 under the means-tested payment.

13. Prior to the UK Government decision to restrict eligibility of WFP we consulted on our policy proposals for PAWHP as a universal payment. Our public consultation on PAWHP ran between 23 October 2023 and 15 January 2024. During our public consultation^[5] on PAWHP, and Social Security Experience Panel survey,^[6] we gathered further evidence from key stakeholders and those with lived experience of the benefit system and experience of island and rural life, including specifically how we might improve delivery for those living off-gas grid.

14. Given the UK Government’s late change in policy and the lack of prior consultation with the Scottish Government, to ensure payments were made to pensioners in Scotland in winter 2024/25, it was not possible to consult further on the proposed eligibility changes to PAWHP prior to laying regulations for a restricted PAWHP.

15. Similarly, following the Cabinet Secretary for Social Justice’s announcement on 28 November, given the timescales for legislating and delivery, it has not been possible to carry out a further public consultation exercise on these proposals. However, we have reflected on the information available to us, from the previous consultation.

16. This Island Communities Impact Assessment now considers the impact of extending the current PAWHP eligibility to all pensioner households from winter 2025/26 onwards.

17. In accordance with section 13 of the Islands (Scotland) 2018 Act, this ICIA has:

• Identified and described areas where PAWHP will have an effect on an island community which is likely to be significantly different from its effect on other communities (including other island communities
• Assessed the extent to which the Scottish Ministers consider that PAWHP can be developed in such a manner as to improve or mitigate, for island communities, the outcomes resulting from it.
• Considered and proposed mitigation or actions to support the aims of PAWHP within the island communities, and
• Considered any financial implications of the above.

18. The positive impacts of PAWHP that have been identified are expected to have a similar impact on rural and island communities as with the rest of Scotland. However, we recognise that fuel costs are on average higher for island communities than urban areas, and that payment values remain consistent across Scotland. 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 which will not be possible this winter. As with all social security benefits, we will continue to consider possible improvements post-delivery, including improvements for rural, island and off-grid communities.

19. The Scottish Government’s primary consideration is always about providing the right level of financial support to those who are entitled to it. However, it is also important to consider deliverability, affordability and to what extent changes might result in increased spending.

20. 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 required to be met from the 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 have to be met from within the fixed Scottish Budget.

21. The Scottish Government has committed to a review of its National Islands Plan. This will consider challenges for islanders in the round including issues around fuel poverty and action that can be taken to address this, and we will continue to consider any impacts a universal PAWHP may have on rural, island and off-grid communities.

Policy Background

22. In July 2016, the Scottish Government launched a public consultation which went on to inform the content of the Social Security (Scotland) Act 2018.^[7] 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.

23. 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.

24. 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.

25. 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 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 this winter (2024/25).

26. As noted above, Scottish Ministers have now 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 will continue to be tax free.

27. The rationale for introducing a universal PAWHP is 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. A universal PAWHP will ensure to benefit pensioner households in rural and island communities as well as pensioners across Scotland by providing vital support to every pensioner household.

28. 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.^[8] Older people are also more likely to spend more time indoors according to a recent survey carried out by Age Scotland.^[9] 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.^[10] Older people are also more likely to live in ‘colder’ and ‘harder to heat homes’.^[11]

29. The 2023 Scottish House Condition Survey found that families (34%) have similar rates of fuel poverty to older households (37%), and other households (32%). However, other households have lower rates of fuel poverty than older households. When considering extreme fuel poverty, families have a lower rate of extreme fuel poverty (12%) than both older households (25%) and other households (19%).^[12]

30. The introduction of universal eligibility to PAWHP will ensure that vital support is provided to all pensioner households. The higher payment value for those in receipt of relevant benefits will ensure that those pensioners most in need of support will continue to receive a higher rate of payment, protecting their incomes. However, there are many pensioners who have not taken up their Pension Credit entitlement, or are just above the income threshold for Pension Credit or other relevant benefits, but are still in need of support. The latest statistics show that take-up of Pension Credit is around 65%, which means that there could be an estimated 68,000 people in Scotland who are eligible for Pension Credit but are not currently claiming it therefore missing out on PAWHP under the current eligibility. The introduction of universal entitlement to PAWHP will ensure that these pensioners also receive vital support.

31. The policy aligns closely with the Scottish Government’s Summary of Strategic Objectives^[13], 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.

32. 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.

33. 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.

34. 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.

35. The Scottish Government continues to support vulnerable households through a range of actions within our limited devolved powers. This year alone, we are spending £210 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.

36. We have 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).

37. 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, with enhanced support for those on low incomes 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 all pensioner households, including those on low incomes, are living in a warm home.
• Health: We are healthy and active. The policy will provide reassurance to older people 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 all people of pension age 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 (around one million older people living in Scotland every year).

Scope of the ICIA

38. This Island Communities Impact Assessment considers the potential effects of delivering a universal PAWHP in Scotland, and how it might impact on those living within island communities.

Key Findings

39. This section provides an overview of issues for Scottish island communities that are relevant for the introduction of a universal PAWHP.

40. Island stakeholders have emphasised the importance of understanding the island experience. Every island is unique with regards to its infrastructure, geography, and demography and therefore, each island has its own specific considerations and constraints.

41. At the time of the 2022 Census, Scotland had 93 inhabited islands with a total population of 102,900 (1.9% of Scotland’s population).^[14]

42. Of these islands, only five are connected to the Scottish mainland by bridge or causeway.^[15] The Islands Act, Part 4 (Section 20 (2), identifies six local authorities representing island communities - Argyll and Bute Council, Comhairle Nan Eilean Siar (Western Isles), Highland Council, North Ayrshire Council, Orkney Islands Council, and Shetland Islands Council. Amongst them, Orkney, Shetland, and Western Isles are entirely island authorities, while Highland, Argyll and Bute and North Ayrshire cover island regions as well as mainland regions.

43. PAWHP will provide all older people with support during the winter months. All pensioner households not in receipt of relevant benefits will receive £100, with those in receipt of a relevant low-income benefit receiving £203.40 or £305.10, depending on their age. The introduction of universal eligibility to PAWHP will ensure that vital support is provided to all pensioner households. The higher payment value for those in receipt of relevant benefits will ensure that those pensioners most in need of support will continue to receive a higher rate of payment, protecting their incomes.

44. A universal payment is expected to increase the number of households in Scotland entitled to a payment to 812,000 for winter 2025-26.^[16] This compares to the 137,000 forecast to receive the payment under the current restricted eligibility in winter 2024/25.^[17] Whilst we will not have analysis broken down at a local authority level until after delivery, based on WFP statistics, we know that in the three island local authority areas (Na h-Eileanan Siar, Shetland and Orkney) there were around 16,000 recipients (around 11,900 households) who received WFPs in winter 2023/24.^[18]

45. There are many pensioners who do not take up their Pension Credit entitlement and therefore miss out on support under the current PAWHP eligibility. The latest statistics show that take-up of Pension Credit is around 65%, which means that there could be an estimated 68,000 people in Scotland who are eligible for Pension Credit but are not currently claiming it. Recent analysis shows that an estimated 193,000 are eligible for Pension Credit in Scotland, but an estimated 126,000 are actually receiving it.^[19]

46. Although analysis is not currently available on the impact of this change to rural and island communities specifically, this general increase in caseload is likely to positively impact pensioners as it supports those who are not eligible for Pension Credit, or who do not take up their entitlement, but still face financial difficulties. A universal approach to PAWHP ensures that all pensioner households are supported during winter months.

Geography

47. Geography, crofting culture, climate and the sparse population of island and rural communities present different challenges to those experienced by living in the mainland. Low and no connections to the gas grid, lower average Energy Performance Certificate (EPC) ratings and the fact that rural dwellings tend to be larger often resulting in higher levels of fuel poverty in these areas. Citizens Advice Scotland^[20] have specifically identified issues regarding being off the gas grid as key barriers for people in accessible rural, remote rural and remote small towns.

48. A number of persistent and related challenges make life in Scotland’s rural and island communities more difficult, particularly in terms of accessing services, availability, and affordability of housing, heightened by house price rises and second home ownership, higher reliance on cars, rising living costs, rising poverty, and fuel poverty.^[21]

49. The colder climate and wind chill factor on the islands means that for many residents, homes may have heating on throughout the whole year. Research has shown the majority of pensioners tend to have a relatively low income, but also low housing costs as they own their home.^[22] Pensioner poverty is a growing issue in Scotland. 53% of participants in a recent Independent Age study revealed their current income negatively impacts their quality of life.^[23]

50. The Scottish Government’s Housing to 2040^[24] strategy sets out an ambition for everyone to have a safe, good quality and affordable home that meets their needs in the place they want to be. This includes rural and island areas.

51. Analysis provided by the Office of the Chief Economic Advisor showed that the restriction of eligibility to WFP, and the subsequent decision to mirror this restriction in PAWHP in winter 2024/2025, will result in a reduction of around 0.5% to household income for rural pensioner households.^[25]

52. Further analysis has found that the introduction of universal PAWHP will result in an increase of around 0.2% to household income among rural pensioner households when compared to the targeted policy. Analysis has also shown that a universal PAWHP will allow for a similar effect on urban pensioner households, where overall household income is also predicted to increase by 0.2%.

53. The introduction of a universal PAWHP will ensure that all pensioner households in rural and island communities receive support towards meeting their fuel costs and therefore will be better able to maintain a comfortable temperature in their homes throughout the winter.

Cost of Living

54. Rural communities already face some of the highest levels of extreme fuel poverty. Recent data has shown that levels of extreme fuel poverty were higher in rural areas (25%) compared to urban areas (18%) in 2023. When considering urban dwellings, 97% are within the coverage of the gas grid, whereas 55% of those in rural areas are not.[26] For dwellings which are off gas grid, the extreme fuel poverty rate was 27%, in comparison to on gas grid dwellings, where the extreme fuel poverty rate was 18%.^[27]

55. The cost of living in rural and island communities is higher than ever because of the current cost of living crisis.

56. The costs of many amenities and activities are higher for people living in island communities than those living on the mainland. A lack of choice, greater distances, remoteness, and accessibility means that shopping, energy bills, travel, postage, mobile phone services and broadband can be more expensive for people living in island communities compared to those on the mainland.^[28]

57. The National Islands Plan^[29] acknowledges that extreme fuel poverty rates are higher for most of the island authorities. We also know that extreme fuel poverty can be particularly difficult to eliminate in island communities where building types are harder to improve to the required energy efficiency standard and opportunities to reduce fuel costs are more limited. In addition, traditionally constructed buildings and energy efficiency challenges can vary between the islands. Higher living costs and higher fuel costs in rural and island communities also impact the minimum income needed for an acceptable standard of living in these communities.

58. The reduction of fuel poverty is a key Strategic Objective of the National Islands Plan. The National Islands Plan provides a framework for action to meaningfully improve outcomes for island communities and therefore many of the key areas of work related to the plan support our island communities to address the cost of living.

59. We are determined to address the higher levels of extreme fuel poverty found in many of Scotland’s remote rural and island areas. We continue to work with consumer stakeholders, suppliers, and the regulator to progress meaningful, collaborative actions, within our limited powers, to support rural communities. This includes calling on the UK Government to introduce a social tariff in the form of an automatic targeted bill discount to provide the right and fair support for some of the most vulnerable energy consumers across the whole of Scotland, as well as ensuring that those using alternative fuels are treated equitable to those on the gas grid. Whilst powers remain reserved, the Minister for Climate Action secured the agreement of energy suppliers and organisations to participate in a working group aimed at co-designing such a scheme – the outputs of which were shared with the UK Government in March 2025.

60. The 2017-2019 SHCS Local Authority analysis figures show there are a higher proportion of dwellings off the gas grid in island Local Authorities: 50% in Argyll and Bute; 88% in Na h-Eileanan Siar; 100% in Orkney, and Shetland; and 61% in Highlands; compared to 17% in Scotland overall.^[30] Off-gas grid properties have a more limited set of alternative fuel suppliers, constraining the ability to deliver reduced heating costs.

61. Similarly, the 2017-2019 SHCS Local Authority analysis shows a higher proportion of dwellings with 3 or more bedrooms in Na h-Eileanan Siar (69%), Highland (62%), Orkney (69%) and Shetland (68%) compared with the national average of 50%,^[31] which means higher fuel bills and potentially greater costs to improve the energy efficiency of these homes. Larger dwellings also necessitate higher fuel bills to reach requisite comfortable ambient temperatures.^[32]

62. A range of work is being undertaken by the Scottish Government to address the challenges that people in island communities face. For example, the Islands Strategic Group was established in August 2016. The group considers strategic issues affecting the island communities of Scotland, and to ensure greater involvement of the relevant councils in helping to identify and design solutions to the unique needs and challenges these communities face.

63. On 24 May 2024, the First Minister announced an additional £1 million round of the Islands Cost Crisis Emergency Fund to help island authorities support their island communities through cost-of-living pressures. In developing the Fund, the Scottish Government engaged widely with our island stakeholders, from civil society organisations to local authorities themselves and our own colleagues in government.

64. Our energy efficiency schemes continue to spend more per head on installations in rural and island areas – where we know costs are higher. Through our Warmer Homes Scotland scheme, we have made available renewable heat measures, some of which may be particularly beneficial to rural and remote communities not served by the gas grid.

65. Initial analysis provided by the Office of the Chief Economic Advisor suggests that as a result of the introduction of universal PAWHP, most pensioner households will be £100 better off. This reflects the fact that only around 16% of pensioner households received PAWHP under the restricted eligibility in 2024/25. Under the proposed universal eligibility, every pensioner household not in receipt of a relevant benefit, who therefore would not currently receive PAWHP, will become eligible for a payment of £100 per household.

66. On average, the £100 payment has a proportionally greater impact on lower income households. However, the average cash amount that households in the lowest deciles benefit by is less because more low income households receive a relevant benefit, and will already be entitled to receive the higher PAWHP payment rate of £200 or £300^[33], which is currently in place.

67. According to the 2023 SHCS, 491,000 households were in extreme fuel poverty under the original WFP eligibility prior to the UK Government’s restriction of Winter Fuel Payment eligibility in July 2024. This would increase to around 501,000 households under the current means-tested PAWHP and 495,000 households for 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.

68. We recognise that fuel costs are on average higher for island communities, and that this has been magnified by the current cost of living crisis. PAWHP will help all pensioner households, including those living in island communities.

Demography, Older People, and Health

69. Scotland has 93 inhabited islands with a total population of 102,900 (1.9% of Scotland’s population).^[34]

70. Data from the National Records of Scotland estimates that the population of the islands increased by 3.8% between 2001 and 2021.^[35]

71. Remote rural areas also have a higher (19%) proportion of older people (65+) who live alone in comparison to the rest of Scotland (14%).^[36]

72. According to the most recent data from the National Records of Scotland, 26,606 people over the age of 65 live on the Scottish islands^[37] and nearly a third (31%) of the Highlands and Islands population is projected to be aged 65 years or older by 2043.^[38]

73. Whilst people living on islands can experience colder conditions in their home which has been proven to impact on health, the 2022 census found that 79.6% of island residents reported their health as being ‘Very good’ or ‘Good’ compared with 78.8% per cent for Mainland Scotland. The proportion of island residents with a long-term (lasting 12 months or more) health problem or disability that limited their day-to-day activities was 24.2%, which was roughly the same as Mainland Scotland (24.1%).^[39]

74. For males, the life expectancy in remote rural and accessible rural areas is around 79 years, nearly 2 years more than life expectancy in the rest of Scotland. For females, the life expectancy in rural areas is around 83 years, nearly 2 years more than in the rest of Scotland.[40] This difference in life expectancies is consistent with WFP statistics which show that across Na h-Eileanan Siar, Orkney and Shetland islands 7,555 men received WFPs in winter 2023/24 compared to 8,450 women.^[41]

75. Research published by Age Scotland in 2022 suggest that 76% of older people are always concerned about paying fuel bills.^[42] Older households in Scotland also have a higher rate of extreme fuel poverty (25%) than families (12%).^[43]

76. Scottish Government analysis showed that 26% of those who received a WFP in Scotland in 2022-23 were aged 80+. Given current take up of Pension Credit (PC), 82% of those aged 80+ who received WFP before restricted eligibility, currently lose out, compared to 89% of those aged below 80. Although a smaller proportion of those aged 80+ currently lose out than those under 80, as WFP payments are larger for those aged 80+, older pensioners who have been affected by the restricted criteria are proportionally worse off financially.

77. Initial analysis provided by the Office of the Chief Economic Advisor suggests that the introduction of universal PAWHP will slightly increase the household income of those aged between 65-74, and those aged 75+, both in cash terms and as a proportion of income. The impact is very similar in both cash terms and as a proportion of income across the age groups affected, with the introduction of universal PAWHP estimated to increase household income by around 0.25%.

78. We acknowledge that older people have an increased need for heat and that they therefore may require additional support to meet the increased heating costs during winter. A universal PAWHP will offer a reliable form of support to all pensioner households each winter, including those living in island communities.

PAWHP Consultation and Experience Panels

79. Prior to the UK Government decision to restrict eligibility of WFP, we consulted on our policy proposals for PAWHP as a universal payment between 23 October 2023 and 15 January 2024. The purpose of the consultation and associated stakeholder engagement was to gather views on the proposed like-for-like delivery, considering eligibility criteria, payment format, to collect additional evidence for those who will receive PAWHP and who are off-gas grid and to identify any unintended consequences of introducing the new payment.

80. We had also invited our Social Security Experience Panels for their views on the key policy options for PAWHP prior to the changes made since the UK Government’s announcement in July.

81. Given the timing of the UK government’s decision to restrict WFP with no prior consultation with the Scottish Government, and the urgency in laying regulations to ensure payments are made to pensioners in Scotland this winter, it was not possible to consult further following the restriction of eligibility to PAWHP.

82. Within the previous consultation, several respondents noted that the challenges faced by island communities are not unique and were often shared by those living in rural areas, such as the costs associated with solid fuels and less established infrastructure and transport links.

83. Many however, acknowledged the additional challenges households face in remote rural, island, or off-gas grid communities, including the higher cost of alternative fuels, colder temperatures, and poorer housing stock. Some respondents suggested that island communities should receive a higher value payment to reflect these costs, or that the payment could be differentiated by the type of fuel that they used.

84. Others noted that housing on islands is often older, or in poorer condition, causing difficulties with heating properties and installing improvements such as insulation. Suggestions included prioritising island communities for assistance with new heating solutions such as heat pumps or local energy generation. A few suggested there should be additional planning in place to provide for these communities in the event of extreme weather or disruption which prevents access to fuel supplies.

85. Further suggestions for how PAWHP could be delivered more effectively to those communities included a higher or supplementary payment, that island residents could be prioritised to receive payments first or, an earlier payment to allow alternative fuels to be bought before winter.

86. Many advocated for the payment to be made earlier, or for greater flexibility around when the payment is made. Respondents suggested payments could be prioritised to this particular group 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.

87. Other respondents suggested that due to the circumstances of island or rural life, higher heating costs and weather conditions, there should be expanded eligibility for fuel payments. Suggestions included widening eligibility to cover all households that were off-gas grid, including disabled or vulnerable households, or assessing cases on an individual basis.

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

89. 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. PAWHP will be delivered by Social Security Scotland from winter 2025/26 onwards. As with all social security benefits, we will continue to consider possible improvements post-delivery, including improvements for rural, island and off-grid communities.

Implementation and delivery plan

90. From winter 2025/26, under the revised policy of universal PAWHP, pensioners in Scotland in receipt of a relevant qualifying benefit will continue to receive higher payments of £203.40 or £305.10, depending on their age. Additionally, all other pensioner households will receive a payment of £100. This will ensure that all pensioner households receive vital support during winter months.

91. PAWHP will be delivered by Social Security Scotland from winter 2025/26. A communications strategy is under development in advance of the introduction of universal eligibility to PAWHP, which will aim to ensure that individuals, the third sector, local government, and advice providers are aware of the expansion of PAWHP eligibility, and understand the eligibility criteria, as well as understanding how and when recipients will receive the payment.

92. We anticipate regulations will be laid before Parliament on 6 June 2025 and subject to parliamentary approval, come into force on 3 October 2025.

Monitoring and Review

93. The Scottish Government has established the Scottish Commission on Social Security (SCoSS), an independent expert body that will scrutinise the Scottish social security system (including benefit regulations) and hold Scottish Ministers to account. As part of their function, they have examined the regulations required for the administration of PAWHP and have produced reports setting out their observations and recommendations in relation to the proposals. These reports have been submitted to Scottish Ministers, the Scottish Parliament and made available to the wider public as required by the duty conferred on Scottish Ministers by section 97 of the Social Security (Scotland) Act 2018.

94. The Social Security (Scotland) Act 2018 required the Scottish Government to create a Charter, which sets out how the Scottish Government will uphold the Principles in the Social Security (Scotland) Act 2018, how we will make sure that we are taking a human rights based approach to social security and how we will demonstrate dignity, fairness and respect in all our actions. The Social Security (Scotland) Act 2018 places a duty on the Scottish Ministers to publish an annual report on the performance of the Scottish social security system during the previous financial year. The report is to describe what the Scottish Ministers have done in that year to meet the expectations on them set out in the Charter and will include information on the impact of island-proofing.

95. Monitoring the impact of the PAWHP will be a continuous process and where any unintended consequences are identified, we will consider what steps can be made to minimise any negative impact.

96. We will collate management information to monitor the characteristics of recipients and will undertake qualitative research to evaluate whether PAWHP is meeting its policy intentions. This will inform any future consideration of variations to policy or delivery arrangements.

97. The Scottish Ministers have also committed to engaging with, and reporting regular progress, to the Islands Strategic Group to ensure that those representing the interests of island communities and others with experience of the current system, are fairly represented in the development and delivery of the Scottish social security system.

Recommendations and Conclusions

98. Through the work undertaken to produce this impact assessment it is clear that living in island communities presents unique challenges for older people.

99. A universal PAWHP will provide all pensioner households with more support than is currently available, as the payment will extend eligibility to all pensioner households, providing vital support every winter to every pensioner household to assist with heating costs.

100. Universal PAWHP will ensure that all pensioner households in island communities will receive support to help them meet their heating costs.

101. However, we recognise that fuel costs are on average higher for island communities than urban areas, and that payment values remain consistent across Scotland. Identifying these groups within the current caseload in order to make payments earlier when relevant fuel prices may be lower, or to make a payment of higher value, would require significant systems development which will not be possible this winter. As with all social security benefits, we will continue to consider possible improvements post-delivery, including improvements for rural, island and off-grid communities.

102. The Scottish Government’s primary consideration is always about providing the right level of financial support to those who are entitled to it. However, it is also important to consider deliverability, affordability and to what extent changes might result in increased spending.

103. 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 required to be met from the 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 have to be met from within the fixed Scottish Budget.

104. The Scottish Government has committed to a review of its National Islands Plan. This will consider challenges for islanders in the round including issues around fuel poverty and action that can be taken to address this, and we will continue to consider any impacts a universal PAWHP may have on rural, island and off-grid communities.

Authorisation

Name and job title of Policy Lead:

Ellen Chrystal, Winter Heating Benefits Policy Manager

Name and job title of a Deputy Director or equivalent:

Ian Davidson, Head of Social Security Policy

Date this version authorised:

14 May 2025