The energy price cap went up again on January 1st, by 1.2%. This brings the average household energy bill energy to £1,738 a year, an increase of £21 a month. This follows on from previous adjustments:
| Month | Average annual bill for those on direct debit * |
| January 2025 | £1,738 |
| October 2024 | £1,717 |
| July 2024 | £1,568 |
| January 2024 | £1,928 |
| October 2023 | £1,834 |
| July 2023 | £2,074 |
| January 2023 | £4,279 (consumers protected by Energy Price Guarantee – so consumers paid less) |
What strikes me about these changes is how significantly they vary from quarter to quarter. It must make planning on a limited budget difficult. And we can’t forget that pensioners spend more on energy than those in working age households as they spend more time at home and may have health conditions which require more heating or use of machines (e.g., dialysis or oxygen).
So what type of impact are we talking about here? In 2023 (I know, it’s a while ago!) average After Housing Costs (AHC) pensioner income was £20,124 – that’s £29,172 for couple households and £13,884 for single pensioners. Single female pensioners had slightly lower average annual incomes of £13,468. As this is a year ago these numbers are a bit loose, but let’s say single pensioners are now on around £14,000pa. That makes energy bills cost around 12% of disposable income, an increase of 1% over six months from 11%.
This is a significant proportion of expenditure, especially for pensioners who are no longer receiving Winter Fuel Payment (WFP). Those not receiving WFP may still be eligible but may not have claimed their Pension Credit (PC) which is now required for eligibility. 35% of those entitled to Pension Credit in 2023 did not claim it. And those with incomes just above the levels of entitlement to PC, and below average pensioner income, are also likely to struggle with high energy costs and spend more than 12% of disposable income on fuel this year.
What’s the lesson here? I think it is that when looking at pensioner income and expenditure, we need to take into account the largest costs. Obviously rent is the largest cost for pensioners who don’t own their own home and don’t have access to affordable housing, but energy costs are becoming increasingly significant and will be even more so with the loss of the WFP for many. I hope that when the Government’s Pensions Adequacy Review is launched, that how to help pensioners manage energy costs is part of the consideration. Though that won’t help pensioners already struggling this year…
* Those on pre-payment meters, typically the poorest pensioners, previously paid more than those on direct debit, but the Government banned the pre-payment premium in 2023.
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