Energy inefficiency and inability to downsize pose even bigger threat to low-income pensioners than loss of Winter Fuel Payments, study suggests

The study, published in Energy Research & Social Science, was completed shortly before the Winter Fuel Payment vote was taken, by researchers from the University of Cambridge and Delft University of Technology (TU Delft).

The researchers raise particular concerns about the impact of the policy on pensioners with annual incomes of between £11,300–£15,000 for single pensioners and £17,300–£22,000 for couples.

Drawing on data from the English Housing Survey, which sampled nearly 12,000 households across all income groups, the study investigated how income, energy efficiency, home size, household type, and tenure status impacted on energy expenditure.

The researchers found that an increase of £1 per year in income (after housing costs, tax and welfare payments) was associated with a marginal increase in heating spending of about one-tenth of a penny.

The study also found that just a small energy efficiency improvement – a one-point increase in the SAP12 rating (The Government's Standard Assessment Procedure for Energy Rating of Dwellings – had a major impact on households in energy poverty, offering an average reduction in annual heating costs of £21.59 per year.

Floor area also had an impact. The researchers found that a one square metre increase was associated with an annual increase in heating spend of £5.04 per year, for households facing energy poverty, making this the worst affected group. This compares with £4.18 per year for high-income households, £3.65 per year for low-income households, and £2.99 per year for very low-income households not in energy poverty.

“When low-income households receive more income, they generally spend a little more to warm their homes. But these households often have to spread any extra money they have across other essential needs including food,” said lead author, Dr Ray Galvin, affiliated with Cambridge Institute for Sustainability Leadership (CISL).

“A reduction in income like the loss of the Winter Fuel Payment could force low-income pensioners to cut back not only on heating but also on other basic necessities. This poses a significant risk to people who are particularly vulnerable to the effects of living in cold homes.”

Energy efficiency

Across all household types, the researchers found that the energy efficiency of the dwelling had by far the biggest impact on heating expenditure.

“The most effective strategy to warm up the homes of people living energy poverty is to increase the energy performance of their dwellings,” said Professor Minna Sunikka-Blank, from Cambridge’s Department of Architecture.

Specifically, the authors advise that the SAP12 rating of homes need to be increased to at least 72.

Each increase in SAP12 energy efficiency rating corresponds to a reduction in heating costs of around £20 per year, meaning that for households in energy poverty, with an average SAP12 rating of 59.48, increasing the rating to the level of low-income households not in energy poverty, 71.45, could reduce heating costs by about £240 per year.

The authors make clear that energy savings would not be sufficient to pay for these energy-efficiency upgrades. They would require targeted financial support.

Dr Galvin said: “Government and society may well find that these costs are paid back to the country through co-benefits of fewer days off work, longer lives and less strain on the health service.”

While this would not improve the finances of households in energy poverty as much as the direct monetary allowances such as the Winter Fuel Payment, it would, the authors argue, make a substantial, direct impact on cold, unhealthy homes.

Dr Galvin said: “There needs to be extra focus on developing policies for the long-term solution of retrofitting energy-inefficient homes. This can provide enduring reductions in energy bills while also improving thermal comfort. This approach may also align better with the goal of reducing carbon emissions and tackling climate change.”

Prof Minna Sunikka-Blank said: “Without retrofit initiatives, energy poverty will persist in the UK, because in low-income households immediate needs often take precedence over thermal comfort, even when incomes increase.”

Home size

The study found that households in energy poverty have a 7.3% larger average floor area than low-income households not in energy poverty, and that floor area makes a substantial difference to heating energy costs (about half to two-thirds the impact that the SAP12 energy efficiency rating has).

Tijn Croon, from TU Delft said: “These findings suggest that inability to downsize may be a significant driver of energy poverty in the United Kingdom. Low-income households can save money and stay warmer living in smaller homes but downsizing is not always easy for older households whose dependants have left home and who find themselves with a large, older home that is very expensive to keep warm.”

One-person households spend less on heating

A surprising finding in the study is that across all income groups, one-person households tend to spend less on energy. And for households in energy poverty the reduction (£36.77 per year) was twice as large as for low-income households not in energy poverty (£15.65 per year).

Tijn Croon, from TU Delft, said: “This might suggest that many one-person households are able to control their energy consumption more strategically than a multi-person household can.”

Dr Galvin said: “Our study controlled for other factors so this is not just a case of low-income households living in smaller homes. Further research could survey one-person households to find out if they have skills and practices that could be transferred to multi-person households.”

Mitigating impact of Winter Fuel Payment cuts

The authors suggest several potential solutions. Expanding Pension Credit eligibility to align with the government's low-income threshold would be the most comprehensive fix, though this may be financially unfeasible. Alternative measures could include a temporary application process for the Winter Fuel Payment for those just above the Pension Credit threshold or providing tax credits or rebates for low-income pensioners, which could be more easily managed since HMRC already holds income data.

While much attention has been given to the risk of energy poverty among pensioners, the authors also note that families with children and young adults are often equally vulnerable and may face even greater challenges in the housing market compared to pensioners.

The authors are currently working on a follow-up research paper that will explore the recent reforms to the government’s Warm Home Discount scheme.

Reference

R. Galvin, M. Sunikka-Blank, T. Croon, ‘Juggling the Basics: How Much Does an Income Increase Affect Energy Spending of Low-Income Households in England?’, Energy Research & Social Science (2024). DOI: 10.1016/j.erss.2024.103766