‘Eat or heat’: the new dilemma for pensioners

Posted on June 9th, 2011 | Categories - Financial News

A new report shows that the poorest pensioners face a tough choice and during very cold spells cut their food bills to heat their home.

The report from the Institute of Fiscal Studies (IFS) found that all retired households raised their fuel spending during cold spells, by on average 7%. However the report also found that at the same time the poorest pensioners also decreased their spending on fuel.

The report comes in the same week that Scottish Power announced above inflation price rises for both gas and electricity.

Other utility companies are expected to follow their lead which would have a disproportionate effect on many pensioner households many of whom rely on just the state pension or fixed incomes, which have fallen in real terms over recent months.

Winter fuel payment

In a second report, published at the same time the IFS found that pensioners spend £41 of every £100 of Winter Fuel Payment on the cost of fuel, however if the same household is given £100 without the Winter Fuel Payment label then just £3 of it is spent on fuel.

The Winter Fuel Payment is between £100 and £300 and is designed to help meet the higher fuel costs of winter, although recipients are not obliged to spend the money on fuel.

“The winter fuel payment was introduced to encourage older households to spend more on heating in the winter,” said Laura Blow, senior research economist at the IFS.

“Remarkably it appears to have had just that effect. The fact that it is labelled a winter fuel payment appears to mean that much more of it is spent on fuel than would have been the case had no such label been attached. This suggests that simply calling a benefit by a particular name can have a real effect on how it is spent. The potential implications for government policy are significant.”