Pension Age Winter Heating Payment (PAWHP): consultation

Section 4 – Proposals for Pension Age Winter Heating Payment

4.1 Pension Age Winter Heating Payment – Overview

Under PAWHP, everyone in Scotland who would currently be eligible to receive WFP would continue to receive the same level of support but will be transitioned to PAWHP, paid by Social Security Scotland. Our intention is that this payment will continue to be non-means tested and tax free. The universal entitlement to, and automatic payment of WFPs means that take-up is very high, with 96% of the eligible population receiving a WFP in 2021/22, and means that it is received by those pensioners on very low incomes who do not claim their entitlement to Pension Credit.

This will provide universal support to pension age people to help them keep their homes warmer throughout the winter. Evidence has shown that living in a cold home can have a negative impact on health, emotional wellbeing and resilience. The PAWHP will not solely be a fuel poverty measure but continues to provide reassurance to older people that they can afford to keep warm in the winter months when heating bills are higher. This is particularly important given the significant increase in cost of living.

In addition to the targeted support for fuel for older households, this also provides a mechanism for any additional financial support that may be required. The UK Government have used the WFP mechanism throughout the Covid-19 pandemic, for example, to provide additional ‘cost of living’ payments, providing a financial boost to older households who have less ability to earn to cover the increased costs.

Based on estimations of eligible claimants, PAWHP will be an investment of around £180 million in the first year (2024/25), providing support to over 1 million eligible people.

During the consultation on Low Income Winter Heating Assistance (LIWHA, now WHP), we considered the naming of the winter benefits and asked for respondent’s views. In our response to the consultation analysis we committed to undertaking further testing of potential names prior to the launch. This concluded in the change in name to ‘Winter Heating Payment’, as people felt it was clearer what type of support was available when ‘payment’ was used in comparison to ‘assistance’. We now plan to align the name of the winter heating benefits and intend to call this new benefit ‘Pension Age Winter Heating Payment’, as we think it will help people identify the purpose of the payment and who it is aimed at.

Question 1a. Do you agree or disagree with the proposal to replace Winter Fuel Payment with a ‘like-for-like’ replacement? (Agree/Disagree/Don’t know)

Question 1b. Please provide further information on why you agree or disagree

Question 2a. Do you agree or disagree that this approach is an effective way for the Scottish Government to provide financial support for older people? (Agree/Disagree/Don’t know)

Question 2b. Please provide further information on why you agree or disagree

Question 2c. Do you have any further comment on the potential longer term development of this benefit in order to provide the most effective support?

Question 3a. Do you agree or disagree with the proposal to name the replacement for Winter Fuel Payment in Scotland ‘Pension Age Winter Heating Payment’ (PAWHP)? (Agree/Disagree/Don’t know)

Question 3b. Please provide further information on why you agree or disagree

4.2 Timing of Payment

We understand the importance for clients in 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.

WFP 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 had previously committed to considering how we could improve PAWHP for people who are off-gas grid. A recent Scottish Government report also indicates that approximately 100,000 off-gas-grid households were considered to be in fuel poverty in 2019, representing a fuel poverty rate of 34%, above the national rate of 24.6%. This is likely to have risen with rising costs. The vast majority (250,000 out of 280,000) of off–gas-grid households live in island or rural communities and use fuel such as oil, gas canisters or solid fuels. The recent cost increases in heating oil prices are likely to see more households fall into fuel poverty. During our consultation on LIWHA (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.

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

At the current time, we have some evidence that this particular group of clients may find earlier payments helpful. However, (a) it’s not clear how many of them would find it helpful, (b) it’d be costly to cater to them only, and (c) making changes for everyone because it would (possibly) benefit a small number of people may not be sensible. We propose sticking with the current approach, making payments in November or December, but would welcome more evidence on the subject.

Question 4a. Do you agree or disagree with the proposal to continue making payments to clients in November or December each year? (Agree/Disagree/Don’t know)

Question 4b. Please provide further information on why you agree or disagree

Question 5. How could we improve delivery for households in remote rural and island communities that are not on the gas grid?

4.3 Eligibility and value of payment

Eligibility for WFP is linked to the individuals age (reaching state pension age) and their circumstances during the qualifying week. This is a universal payment and Scottish Ministers have committed to not means testing or taxing it when we take responsibility and deliver PAWHP.

Schedule 4 of the Social Security (Scotland) Act 2018 limits means-testing of winter heating assistance, unless entitlement is based on receipt or underlying eligibility to receive another type of assistance.

For delivery of PAWHP we rely on DWP to provide the data required to identify eligible clients. This is drawn from a number of different DWP technical systems. Making significant changes to the qualifying criteria would increase the technical complexity of identifying clients and therefore impact on the delivery timetable we have set out. Agreement with DWP would be needed for them to undertake the necessary development work and this would also create a risk that clients are not paid correctly or on time.

We do not intend to make changes to the eligibility criteria that establishes entitlement to PAWHP. Therefore, those clients who are currently eligible for WFP due to reaching state pension age will automatically be eligible for a PAWHP payment. This will ensure that older people continue to receive support with minimal disruption.

Residency

Most people eligible for PAWHP will be resident in Scotland. When WFP was introduced it was not originally payable to people resident abroad. However, following discussions between the UK Government and the European Commission (EC), it was decided in 2002 that it came within the scope of EC regulations on the co-ordination of social security systems and was therefore “exportable” within the European Economic Area (EEA) and Switzerland. This meant that people who qualified for the WFP could continue to receive it if they moved to another EEA country or Switzerland. In order to make this support more targeted, work was undertaken to limit this to people residing in countries with colder or similar climates to the UK and from 2015-16 WFP was no longer payable to individuals living in countries with an average winter temperature higher than the warmest region of the UK (the south west of England).

For PAWHP we intend to reflect the same residency criteria which will mean if someone falls into scope of the UK-EU Withdrawal Agreement, has a genuine and sufficient link to Scotland, and hasn’t been claiming WFP previously, they may still be eligible for a PAWHP.

Value of Payment

The amount you will get paid depends on your household circumstances. The payment rates are £100, £150, £200 or £300 for individuals, resulting in a typical household of two generally receiving £200 or £300 in total. Keeping the same eligibility criteria, but introducing a flat rate of payment, would simplify the process and the technical solution.

In order to ensure that no one is worse off the flat-rate payment would need to be £300, which would have a significant impact on the budget and would be unaffordable at this time. An alternative flat rate of £200 was considered which would also increase the budget but would likely have a detrimental effect on those aged over 80 who were living alone or with no-one else over the state pension age. Given the increased vulnerability of those over the age of 80 we would not consider this as an appropriate alternative.

We therefore intend to maintain the current values of payments. That means, generally, that a typical household where the oldest person is under 80 will receive £200 and a household containing a person aged 80 or over will receive £300. The exception to this is where someone is in residential care.

Residential Care

As illustrated in the table above, people who are living in residential care during the qualifying week, and the period of 12 weeks immediately before the qualifying week, do not qualify for the ‘full’ rate of WFP.

People in residential care who are not in receipt of specific benefits listed in the table are entitled to a WFP of either £100 if they are aged 66 to 79 or £150 if they are aged 80 or over. This is because they share the accommodation with other people who are also entitled to the payment and are responsible for a share of the heating costs.

Those who are living in residential care and receiving one of the specific benefits receive no payment. This is because historically people living in a care home and in receipt of an income-related benefit have received public funding for their care and accommodation costs including heating through funding from the local authority. As this is still the case for the vast majority of people receiving Pension Credit, the WFP is not payable.

Other exclusions

Other exclusions apply for WFP which we intend to reflect for PAWHP and would result in no award. That includes if the individual has been in hospital for more than a year or are in prison throughout the qualifying week. Similarly to those in residential care, public funding will cover the costs of heating the accommodation and therefore no additional support is required.

Financial Implications

In winter 2021/22 there were over 973,000 payments made to WFP recipients in Scotland totalling more than £171 million. On the basis of delivering a like-for-like benefit the benefit expenditure for PAWHP will be covered by the Block Grant Adjustment. Any changes in value that would lead to increased benefit expenditure would need to found from within the fixed Scottish Budget. Given the significant pressures on public finances, and the significant amount of money required to provide any increase to all eligible recipients, this limits scope for additional increases to the value.

Question 6a. Do you agree or disagree that our approach to identifying eligibility should be based on reaching state pension age? (Agree/Disagree/Don’t know)

Question 6b. Please provide further information on why you agree or disagree

Question 7a. Do you agree or disagree that the eligibility criteria for the PAWHP are clear? (Agree/Disagree/Don’t know)

Question 7b. Please provide further information on why you agree or disagree

Question 8a. Do you agree or disagree with the proposal to retain the current value of payments? (Agree/Disagree/Don’t know)

Question 8b. Please provide further information on why you agree or disagree)

Question 9a. Do you agree or disagree that people in residential care who do not receive the income-related benefits listed should receive half of the ‘full’ rate of PAWHP? (Agree/Disagree/Don’t know)

Question 9b. Do you agree or disagree that people in residential care who receive one of the income-related benefits listed should not receive PAWHP? (Agree/Disagree/Don’t know)

Question 9c. Please provide further information on why you agree or disagree

4.4 Receiving the Payment

Our intention for PAWHP is to continue to pay clients automatically on an annual basis. This would take the form of a cash payment, as is the case now with individual WFPs. Currently eligible clients for WFP are identified and paid through the system which processes their State Pension or other benefits.

The majority of respondents to our Experience Panels survey on winter heating benefits reported positive experiences, and some respondents particularly appreciated that payments were made automatically into their account. For the vast majority of people there is no need to apply and payments are made automatically into a client’s bank account.

Generally, any eligible person in receipt of a DWP-administered benefit, including their state pension, or who has previously received a WFP, will automatically receive a WFP with no requirement to claim. An individual will need to claim:

• if they are not in receipt of a DWP-administered benefit (including their State Pension) and has not received a WFP before or has deferred their State Pension since their last WFP.
• if they live abroad, even if they do get a DWP-administered benefit.
• if they’re a mixed aged couple in receipt of Universal Credit.

We intend for applications for each winter to open on the Monday of the qualifying week and to close on 31 March. This would allow applications throughout the winter that the payment is intended to provide support with.

Opting-out

WFP is a universal payment for older age people and we know there will be some people who may not require additional support during the winter due to their level of income. DWP currently provide an option to opt-out of receiving WFP if the eligible person does not wish to receive it or alternatively suggest people can donate it to a charity of their choice. We intend to mirror that approach for PAWHP, and provide the opportunity to opt-out of the payment ahead of the winter period. The person would continue to be ‘opted out’ unless they advised Social Security Scotland that they wanted their payment to resume. This means that pensioners who do not feel they require additional support, because they have a high level of income for example, can choose not to receive it.

Question 10a. Do you agree or disagree with the proposal for PAWHP to be given to clients in the form of a cash payment and not another form? (Agree/Disagree/Don’t know)

Question 10b. Please provide further information on why you agree or disagree

Question 11a. Do you agree or disagree with the proposal to pay PAWHP as an annual one-off payment each winter? (Agree/Disagree/Don’t know)

Question 11b. Please provide further information on why you agree or disagree

Question 12a. Do you agree or disagree with the proposals for providing a way for people to opt-out of receiving PAWHP?’ (Agree/Disagree/Don’t know)

Question 12b. Please provide further information on why you agree or disagree

4.5 Qualifying Week

Eligible clients are identified and paid automatically if they meet the qualifying criteria during the qualifying week. We understand that a preference for a later qualifying week would reduce the number of people who ‘miss out’ on the payment in their first winter due to not meeting the age criteria.

However, it is important that we maintain the qualifying week in September as this allows DWP to identify and provide Social Security Scotland with data on eligible clients and for Social Security Scotland to then determine the correct rate of payment for each 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.

Setting the ‘qualifying week’ for the week beginning with the third Monday in September of any given year is also consistent with the approach for CWHP.

Question 13a. Do you agree or disagree with the proposal to continue having the ‘qualifying week’ in September to identify eligible clients? (Agree/Disagree/Don’t know)

Question 13b. Please provide further information on why you agree or disagree

Question 13c. If you disagreed, please provide a preference for when you think the qualifying week for PAWHP should be