Pension Age Winter Heating Payment: Fairer Scotland Duty Assessment (FSD)

Fairer Scotland Duty Assessment

Title of Policy, Strategy, Programme etc.

Pension Age Winter Heating Payment

Summary of aims and expected outcomes of policy

Pension Age Winter Heating Payment (PAWHP) will replace the UK Government’s Winter Fuel Payment (WFP) in winter 2024. This new benefit will be delivered by the Department of Work and Pensions (DWP) in 2024/2025, on behalf of the Scottish Government,. The UK Government’s decision to restrict eligibility for Winter Fuel Payments left Scottish Ministers with no choice but to mirror this approach in Pension Age Winter Heating Payment, our replacement for Winter Fuel Payment. Given the short notice of the change in policy it is necessary for payments to be made in Scotland this Winter by the Department for Work and Pensions on behalf of the Scottish Government to ensure there is no gap in provision of support for vulnerable pensioners in Scotland this year.

Payments will be made in terms equivalent to the UK Government’s current approach to WFP, providing support to between 110,000 to 130,000 eligible people who have reached state pension age and are in receipt of relevant benefits this winter. 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 Credit and Child Tax Credit.

Payments are set at £200 or £300 depending on the age of those receiving the relevant eligible benefits during ‘the qualifying week’ in September when entitlement is established. This will provide pensioners in receipt of the relevant benefits with extra support to help meet increased heating costs during the winter. This support is particularly important given that energy prices remain high amid the current cost-of-living crisis.

This will lead to an investment of approximately £30 million and is anticipated to assist between 110,000 to 130,000 older people in Scotland this year, dependent on Pension Credit take-up.

National Outcome

The policy aligns closely with the Scottish Government’s Wealthier and Fairer Strategic Objectives, but also links with the Scottish Government’s strategic priorities to support older people and the cost-of-living crisis. The policy 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 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 older people on low incomes are living in a warm home.
• Health: We are healthy and active. The policy may reassure vulnerable older people on low incomes that they can afford 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 provision of a new benefit we help progress the support that is available.
• Poverty: We tackle poverty by sharing opportunities, wealth, and power. The policy intention of PAWHP is to provide financial support to people of pension age on low incomes who have a greater need for heat during the winter months. This payment specifically targets households who are on low income and due to their age, may require an enhanced heating regime, and therefore may incur greater energy costs (between 110,000 and 130,000 older people living in Scotland).

Summary of evidence

This Fairer Scotland Duty Impact Assessment has been developed drawing on a range of primary research, including the 2016 public consultation on the content of the Social Security (Scotland) Act 2018,^[1] the consultation on Winter Heating Payment (WHP, previously ‘Low Income Winter Heating Assistance’),^[2] the recent consultation on PAWHP,^[3] desk research and engagement with those with lived experience of benefits.

In July 2016 the Scottish Government launched a public consultation to support the development of a framework that would become the Social Security (Scotland) Bill.^[4]

WFP and Cold Weather Payment (CWP) were incorporated into this consultation. We asked, ‘Do you have any comments about the Scottish Government’s proposals for Winter Fuel and Cold Weather Payments?’ 164 respondents answered this question (82 individuals and 82 organisations).

Overall, many respondents felt that WFP and CWP were necessary to help tackle fuel poverty and inequality and they generally welcomed the approach. Some of the themes highlighted by respondents on winter heating benefits included:

• In general, respondents supported a broad continuation of the current eligibility criteria.
• Whether the delivery of WFP could be improved, particularly for households in rural and island communities that are not on the gas grid.

In 2020, we launched ‘Child Winter Heating Payment’ (CWHP, previously Child Winter Heating Assistance) 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.

In February 2023 we launched 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.

A Social Security Experience Panel survey undertaken in February 2020 showed that respondents noted that the payment was helpful to them.^[5]

Some people felt that the payment amount could be increased, and that the payment could have been advertised better. Some people also felt that payments could have been made earlier in the year, particularly those with off-grid supplies. Some believe that the information on the different types of WFP could be clearer.

Prior to the UK Government decision to restrict eligibility of WFP, we consulted on policy proposals for PAWHP as a universal payment, in line with our commitment to match WFP eligibility. 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 would receive PAWHP and who are off-gas grid and to identify any unintended consequences of introducing the new payment including the impact of the new benefit on businesses and key stakeholders.^[6]

We also invited members of our Social Security Experience Panels for their views on the key policy considerations for this new benefit alongside the public consultation.

Within responses to the PAWHP consultation, there was broad agreement that the like-for-like introduction of PAWHP would be an effective way to provide financial support for older people, with 58% of individuals and 89% of organisations agreeing.

Although 80% of respondents expressed support for universal eligibility, some stakeholders disagreed, with five organisations calling for the benefit to be targeted more effectively at those in fuel poverty. This was on the basis that any savings could provide additional funding to support other fuel poverty initiatives.

Our Experience Panel returned similar responses. 83% of respondents agreed that the proposed format for PAWHP would be an effective way for the Scottish Government to provide financial support to older people; 69 % agreed with eligibility remaining linked to those reaching state pension age, 21% disagreed. Younger respondents were more likely to disagree. ^[7]

Link between poverty and older age

Fuel poverty statistics tell us that older households (36%) have a higher fuel poverty rate than families (27%), and higher extreme fuel poverty (24%) than families (10%).^[8]

In addition to this, older households are less likely than families and other household types to report that their heating system doesn’t always keep them warm in winter - 18%, compared to 27% of families and 23% of other households.^[9]

Between September and November 2022, Independent Age commissioned research to explore the experience of living in poverty for older people in Scotland.^[10] 53% of participants revealed their current income negatively impacts their quality of life.

Pensioner poverty is a growing issue in Scotland, with one in seven people over state pension age living in poverty.^[11] By 2030, one in five people in Scotland are expected to be over pensionable age – a total of 1.1 million people.^[12] The image below illustrates the percentage of the UK population who were aged 65 and over in 2016, and the projected percentages in 2039:^[13]

Source: 2016 mid-year population estimates for UK, Office for National Statistics, 2014-based subnational population projections for UK, Office for National Statistics, Welsh Government, National Records Scotland and Northern Ireland Statistics and Research Authority, contains OS data © Crown copyright 2018

The impact of fuel poverty on households who require an enhanced heating regime

Living in a cold home can be detrimental to many older people. There is a strong relationship between cold homes and cardiovascular and respiratory disease.^[14] The links between long term health conditions, poor health, wellbeing, and living in a cold, damp home is well recognised.

With reduced muscle mass and poorer circulation, they are not as physiologically able to keep warm during cold periods. This can affect their immune systems, amplifying pre-existing conditions and have an effect on their mental health.^[15]

In addition, there is also evidence on the mental health and wellbeing impacts of living in cold homes and experiencing fuel poverty, and the benefits to mental wellbeing which can be delivered from tackling fuel poverty across the age range.^[16]

The Scottish Government estimates that 15% of pensioners (150,000) over state pension age were living in relative poverty after housing costs in Scotland between 2020 and 2023.^[17]

The likelihood of being disabled/experiencing chronic and complex health conditions among those 65 and over increases with age.^[18]

Also, fuel poor households with low levels of energy efficiency are more likely to have at least one member who has a long-term illness or disability (56%) when compared to non-fuel poor households in similarly inefficient homes (41%).^[19]

Fuel poverty, as defined in the Fuel Poverty Act 2019 and the Scottish Fuel Poverty strategy, is when a household has to spend more than 10% of their income on fuel costs, in order to maintain a satisfactory heating regime and if after deducting fuel costs, benefits received for a care need or disability and childcare costs, the household’s remaining adjusted net income is insufficient to maintain an acceptable standard of living. The remaining adjusted net income must be at least 90% of the UK Minimum Income Standard (MIS) to be considered an acceptable standard of living, with an additional amount added for households in remote rural, remote small town and island (RRRSTI) areas.

The World Health Organisation (WHO) have defined this as 21ºC in the living room and 18ºC in other rooms, for 16 hours in every 24, unless the household is classified as “vulnerable”, such as when at least one resident has a long-term sickness or disability. In these instances, the heating regime required is 23ºC in the living room and 18ºC in other rooms, for 16 hours per day.

Considering this guidance, the Scottish Fuel Poverty Definition Review Panel recommended in 2017 that for ‘vulnerable households’, including those of disabled people, the living room temperature recommendation should be 23ºC and other rooms 20ºC.

This was updated in the Fuel Poverty (Enhanced Heating) (Scotland) Regulations 2020, which specifies the households for which enhanced heating temperatures and/or hours are appropriate.

• Enhanced heating temperatures are 23°C in the living room and 20°C in other rooms.
• Standard heating temperatures are 21°C in the living room and 18°C in other rooms.
• Enhanced heating hours are 16 hours a day during the week and at the weekend.
• Standard heating hours are 9 hours a day during the week and 16 hours a day during the weekend.
• A satisfactory heating regime is defined as follows.
• Enhanced heating temperatures and enhanced heating hours (enhanced heating regime 1) are appropriate for households where the dwelling is frequently occupied during the morning or afternoon or both on weekdays by any member of the household when it is cold and any member of the household meets one or more of the following criteria: is aged 75 or over; has a long-term sickness or disability; or is in receipt of benefits received for a care need or disability.
• Enhanced heating temperatures and standard heating hours (enhanced heating regime 2) are appropriate for households where the dwelling is not frequently occupied during the morning or afternoon or both on weekdays by any member of the household when it is cold and any member of the household meets one or more of the following criteria: is aged 75 or over; has a long-term sickness or disability; or is in receipt of benefits received for a care need or disability.
• Standard heating temperatures and enhanced heating hours (enhanced heating regime 3) are appropriate for households where the dwelling is frequently occupied during the morning or afternoon or both on weekdays by any member of the household when it is cold and any member of a household has a child aged 5 years old or under and the household is not a household for which enhanced heating regimes 1 or 2 are appropriate.

For all other households, standard heating temperatures and standard heating hours (the standard heating regime) apply

In spite of the WHO recommendations, research shows that vulnerable households often struggle to afford adequate energy consumption to meet their needs.

Summary of assessment findings

Universal vs Targeted Approach

A range of ideas about the use of the funding available for PAWHP to better target support were discussed in the recent consultation. This preceded the changes made by the UK Government, which as noted below have significant reduced the funding available and led the Scottish Government to conclude on grounds of affordability that it has no choice but to replicate the changes to eligibility made by the UK Government.

Under the eligibility rules set out in the regulations the automatic payment of the benefit means that take-up is expected to be high and payments to be received by those pensioners on very low incomes and in receipt of relevant benefits.

However, the take up of Pension Credit, which is the main relevant benefit, 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.^[20] The Cabinet Secretary for Social Justice has therefore 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 ensure that those entitled to WFP and Pension Credit in Scotland are not missing out. 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 our older people to receive a Pension Age Winter Heating Payment. The Minister for Climate Action also secured the agreement of energy suppliers to participate in a working group aimed at co-designing a social tariff.

Based on caseload estimations of eligible individuals, PAWHP will lead to an investment of approximately £30 million in winter 2024, providing support to between 110,000 and 130,000 eligible people, dependent on Pension Credit up-take.

As noted above, consultation responses demonstrated support for universal eligibility with four fifths (80%) of respondents agreeing, 14% disagreeing, and 6% were unsure. Among organisations who answered, 81% agreed and 19% disagreed.^[21]

Consideration was also given to a more targeted approach such as using the funding towards increasing the value of the Warm Home Discounts scheme or limiting the payment to people who have been identified as fuel poor.

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 current value, 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 current value 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, more agreed (41%) than disagreed (34%) that the value of payments was appropriate. However, 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.^[22]

Given the reduction in funding associated with the UK Government decision to restrict eligibility for WFP and the wider constraints in the Scottish budget, increasing the value of payments would not be affordable

We therefore intend to maintain the current values of payments in terms equivalent of the UK Government’s WFP. That means that an individual or a benefit household under the age of 80 will receive £200, and an individual or a benefit household with a member aged 80 or over will receive £300.

Impact of the qualifying week

Eligible clients for PAWHPs 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 in September as this provides sufficient time for DWP to identify eligible clients and for payments to be processed and made to clients in winter.

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. With DWP providing payment under agency agreement this winter, it is expected that payment timing should not be adversely impacted, with payments in Scotland expected to begin a day after England and Wales.

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 are committed to considering how we could improve PAWHP for people who are off-gas grid. The 2022 Scottish House Conditions Survey^[23] also estimates that approximately 142,000 off-gas-grid households were considered to be in fuel poverty in 2022, representing a fuel poverty rate of 30%, 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.

During our consultation on LIWHA^[24] (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.^[25]

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, will require significant systems development which will not be possible this winter as DWP will administer the payment this year. 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. Moreover, due to the short notice of change in policy by the UK Government and subsequent extremely tight legislative timeline, it would not be practical to bring in any changes and any attempts to do so would not be deliverable. Further consideration of the how we could improve PAWHP for people who are off-gas grid will be included as part of future improvements when the Scottish Government conducts the post-implementation review of PAWHP.

Difference of support available for groups with similar needs

The Scottish Government acknowledges that other people of pensionable age may also face financial difficulties and would benefit from this support. 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. Given the budgetary restraints imposed by the UK Government's decision, support is targeted to those individuals on the lowest incomes who can readily be identified as most likely to benefit most from this support this winter.

It has been identified that the provision of this additional support to those of state pension age in receipt of relevant low income benefits results in differential treatment based 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 low income benefit 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. Although other groups would also benefit from this support, this must be balanced with budgetary restraints. The changes to WFP eligibility will reduce the Block-Grant Adjustment associated with devolution of the UK’s WFP by an estimated £150 million in 2024-25, over 80% of the cost of the Scottish Government’s new replacement benefit. Given these financial constraints it would not be possible to extend the payment to all groups who may benefit from this support.

Similarly, this approach is required to ensure that everyone in Scotland who would be eligible for WFP continues to receive this support through the introduction of PAWHP. This approach will enable DWP to make payments in Scotland and ensure there is no gap in provision in winter 2024/25 following the UK Government’s announcement to restrict WFPs to those in receipt of relevant benefits.

Tackling Fuel Poverty

PAWHP is provided alongside a range of wider measures in line with the Scottish Government’s commitment to tackling Fuel Poverty.^[26]

Our energy efficiency delivery programmes – Warmer Homes Scotland and Area Based Schemes - have supported over 150,000 households living in, or at risk of fuel poverty in the past decade.

The Warmer Homes Scotland programme offers funding and support to households struggling to stay warm and keep on top of energy bills. It is designed to help people make their homes warmer and more comfortable by installing a range of energy saving improvements. The primary objective is to support households in, or at risk of fuel poverty through the heat transition, and to remove poor energy efficiency as a driver of fuel poverty for these households.

The scheme was relaunched on 02 October 2023 with more funding and more help for households to receive a climate-friendly heating system.

Since December 2022, our Island Cost Crisis Emergency Fund has already provided £2.4 million to mitigate against some of the unique challenges faced by islanders, including a colder climate, higher fuel and energy costs, and reduced consumer choice.

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, with a renewed focus on tackling child poverty. This is in addition to the £4 million allocation to island local authorities, announced earlier in the year, in connection to the ongoing review of the Special Islands Needs Allowance.

Support in addition to social security payments, and the support mentioned above, is available through the Scottish Governments investment in our Council Tax Reduction Scheme and 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.

The Scottish Government continues to support vulnerable households from fuel poverty through a range of actions within our limited devolved powers. This year alone, we are spending £134 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.

The Scottish Government is committed to tackling fuel poverty and has consistently supported vulnerable households through a range of actions, including delivering our Winter Heating Payment which, in contrast to the UK Governments Cold Weather Payment, guarantees a reliable annual payment of £58.75 to people on low-incomes, including those pensioners in receipt of Pension Credit each winter.

Ending child poverty is our single greatest priority. We’ve already consistently up-rated all benefits in line with inflation, and our intention now is to provide certainty to families and put more money in their pockets by making it a legal requirement to annually up-rate all devolved benefits – including Best Start Grants, Best Start Foods and our winter heating payments. This is an estimated investment of at least £6 million for 2025-26, rising to at least £12 million in 2029-30, according to the latest published SFC forecasts.

We continue to engage with the UK Government, Ofgem and the energy industry to advocate for reform that protects vulnerable consumers from price shocks, affordability challenges and ever increasing energy debt. The Minister for Climate Action has also secured the agreement of energy suppliers to participate in a working group aimed at co-designing a social tariff.

Monitoring and Evaluation

In line with our approach across all new Scottish Government benefits, we will conduct a post-implementation review of PAWHP.

Ministers will report to the Scottish Parliament every year on what Social Security Scotland has done to ensure the commitments in the Social Security Charter are being delivered. The Scottish Commission on Social Security (SCoSS) will also report to the Scottish Parliament on Social Security Scotland’s progress against what was promised in the Charter.

In this way we will invest in the people of Scotland, making a positive difference to the lives of all.

Conclusion

PAWHP will provide older people on relevant benefits with the same level of support as is currently available, as the payment will mirror the current WFP eligibility criteria. This Fairer Scotland Duty has identified that overall, on that basis, the introduction of PAWHP to replace WFP is likely to have a neutral impact on reducing inequality and tackling poverty for older people by continuing to mitigate some of the winter heating costs experienced by older people on low incomes.

Working with individuals and organisations with experience of the benefits system is central to our approach to developing the devolved social security system in Scotland.

Prior to the UK Government decision to restrict eligibility of Winter Fuel Payment, we consulted on our policy proposals for PAWHP as a universal payment. The findings of our public consultation and Experience Pannels indicated broad support for the like-for-like introduction of a universal PAWHP, with 80% of all respondents in favour of this approach. However, some stakeholders with an interest in poverty, including fuel poverty, were more likely to disagree with this approach, with five organisations calling for the benefit to be targeted more effectively at those in fuel poverty. This was on the basis that any savings could provide additional funding to support other fuel poverty initiatives.

Following the UK Government announcement, and the accompanying reduction of Block Grant Adjustment funding by up to £150 million in 2024/2025, we are committed to delivering PAWHP through DWP in terms equivalent to WFP in England and Wales for Winter 24/25, ahead of Social Security Scotland taking responsibility for delivering this payment in 2025/26. Policy development will continue to consider potential improvements that could be implemented in the future, and the insights from our public consultation and Experience Panels will continue to inform this work.

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Name: Ian Davidson

Job title: Head of Social Security Policy