Energy price cap increase will hit millions at same time as winter fuel payment axed

The government has been urged to rethink its plans to remove the winter fuel payment for millions of pensioners after it emerged the energy price cap will rise in October.

Around 10 million people in England are set to lose out on the payments of up to £300 as the new government restricts the benefit to only those receiving pension credit.

The move was announced last month by chancellor Rachel Reeves after she said there is a £22bn “black hole” in this year’s budget.

But following Ofgem’s announcement on Friday that the energy price cap would rise by 10% from October, MoneySavingExpert.com founder Martin Lewis, charities and opposition parties all called for a U-turn.

With millions facing an energy bill double whammy this winter, Yahoo News UK explains what’s going on.

Ofgem price cap rises

The average household energy bill is to increase by £149 from October after Ofgem said it was increasing its price cap during the winter months.

The regulator announced it is hiking its price cap by 10% - from the current £1,568 a year for a typical household in England, Scotland and Wales - to £1,717.

It means households will be going into the colder months facing higher bills than April, when the cap was lowered.

Watch: Energy price hike will be difficult for households - Ofgem

Ofgem said rising prices in the international energy market, due to heightened political tensions and extreme weather events, were the main driver behind the decision.

Gillian Cooper, director of energy at Citizens Advice, said bills will be around two-thirds higher than before the energy crisis began in late 2021. She added: "With record levels of energy debt and the removal of previous support, people are in desperate need.”

Experts also think there is likely to be a further increase in January amid further tensions in the Russia-Ukraine war.

Read more: What is the Ofgem energy price cap? Households to face higher energy bills (Evening Standard)

Winter fuel payment changes

The government is offering either £200 or £300 to eligible people born before 23 September, 1958, in order to help pay their heating bills this winter. They will be given the cash in November or December.

However, the criteria is far stricter this year.

Previously, anyone over state pension age could receive the payment. But in one of its first major policy decisions last month, the new Labour government reduced eligibility as part of a £1.4bn cost saving, with only people receiving pension credit qualifying for the payment.

This means the number of pensioners in receipt of the payment is falling by 10 million, from 11.4 million to the 1.4 million who already receive pension credit.

However, the government estimates up to 880,000 pensioner households are eligible for the support but are not claiming it.

Read more: Ministers launch pension credit campaign after restricting winter fuel payments (The Guardian)

Martin Lewis calls for rethink

Martin Lewis, the founder of MoneySavingExpert.com who is regarded as one of the country's most trusted voice on personal finance, said high energy bills "are here to stay" for at least the next 12 months, and that "the government should rethink getting rid of the winter fuel payment the way it’s done so."

He told BBC Radio 4's Today programme: "Pension credit is a payment for those on an income of less than £12,600. That’s very, very low. While I actually agree there’s a very strong argument for getting rid of the universal winter fuel payment, I think the eligibility criteria is far too narrow.

“My suggestion would be... pensioners in council tax A to D should get the winter fuel payment. That would raise eligibility above just those who are on pension credit. It’s an imperfect solution, but it’s a workable, quick solution.

“It’s fine to drop universality, but we’ve gone from allowing everyone to have it to just having the poorest pensioners on the very lowest incomes - and as always it’s those just above the threshold who miss out."

Lewis said he is due to meet Reeves in the next fortnight and said he will "push" a loosening of the criteria.

Read more: How can I lower my energy bills and what help is there for me? (PA Media)