Energy price rises and price cap discussion.

[Wynd]

How is someone on a state pension going to be able to deal with this? £4000 is as near half of that?!

Many will not have a choice to pay for heating, particularly those this far north. Turnign the heating on when its -20 out isnt exactly a choice.

 

[Lost property]

I'm with Bulb and I've never had an issue with the Direct Debit. They do occasionally email to suggest increasing it but their suggestions seem reasonable based on my usage, and you can adjust it whenever you like.

Given how many of these companies have gone bust (including Bulb, they're being managed by administrators) I would be reluctant to build up much credit. I know you get it back eventually but I understand it can take a long time if the supplier goes into administration and you end up being transferred elsewhere.

Oh yes, they certainly do in the case of BG email with helpful offers such as the one I received recently for a mere 254% !! increase to £339 pm as I was "behind on my payments"....really ?....so why have my statements consistently said "good news, your payments are spot on " and "you are using less gas / elec than this time last year "....this is no surprise given my change in circumstances and my smart meter, otherwise known as a pen / paper and some simple maths records the usage monthly, which, strangely, is then sent to BG.

There's a long saga to what happened next, including by valid debit card being " not recognised " nine times...even though it's not blocked and perfectly valid. There was a BIG block inviting me to accept this kind offer....and a very small line allowing me to decline.

The upshot was the DD remained the same...however, think about it...how many people would panic / be shocked etc and simply accept....thereafter, once the money has been earning interest for BG, "oops, you seem to have built up a lot of credit, so here's a generous refund "

 

[Bletchleyite]

It's not going to be earning huge amounts of interest with rates as they are.

The conspiracies are fun, but the reality is the rather more boring fact that the algorithms setting the DD level aren't designed for such volatile prices.

 

[Snow1964]

How is someone on a state pension going to be able to deal with this? £4000 is as near half of that?!

Many will not have a choice to pay for heating, particularly those this far north. Turnign the heating on when its -20 out isnt exactly a choice.

Firstly it represents a typical family house, not a one bedroom retirement flat. If someone on their own chooses to live in a large poorly insulated property that is their lifestyle choice.

Of course, those in poorly insulated houses will waste more heat than those who have invested in insulation to keep their expensive heat in.

Isn’t the state pension just a base pension amount, which is expected to be topped up by company pensions, widows pensions, personal pensions, or part time work.

Unfortunately as we all know there are some who never really saved enough for their retirement and are going to struggle, and would struggle whatever the energy price.

 

[najaB]

If someone on their own chooses to live in a large poorly insulated property that is their lifestyle choice.

Not necessarily. They could be in a situation where the amount they would get for selling wouldn't be enough to pay for somewhere smaller - e.g. it could be a large house in a poor state of repair - or they might be unable to sell for other reasons.

 

[ainsworth74]

How is someone on a state pension going to be able to deal with this? £4000 is as near half of that?!

Or someone on Universal Credit. The standard allowance for a single person aged twenty-five or over is £4,018.92 per year at the moment or £334.91 per month.

Of course, those in poorly insulated houses will waste more heat than those who have invested in insulation to keep their expensive heat in.

And if they live in a rented property where it's not their responsibility? Or if they've not had the funding available to invest in insulation? Or if they need a larger property because they help out with childcare? I'm not quite sure it's a simple as saying "they should have better insulated their property and/or move, only got themselves to blame".

Isn’t the state pension just a base pension amount, which is expected to be topped up by company pensions, widows pensions, personal pensions, or part time work.

Is it? I'm not sure it's ever been advertised as something which needs to be "topped up" (open to correction). Certainly if you wanted a comfortable retirement with money to spend on nice holidays and with which to spoil the grandkids then having another source of income was going to be required. But to need tops ups just to afford food and heat?

Unfortunately as we all know there are some who never really saved enough for their retirement and are going to struggle, and would struggle whatever the energy price.

Or never had the opportunity to save "enough" for retirement. I do in general terms agree that people don't make sufficient provision for a comfortable retirement but I find it odd that there is a suggestion you shouldn't expect that a state pension would be enough for you to afford food and heating. That isn't, to me understanding, the position historically nor indeed, I would suggest, should it be accepted to be the position now. Enough to afford fancy holidays? No probably not. Enough to afford heating and food? Yes surely it should? Is that not the point of a Welfare State?

It seems potentially somewhat callous to take a view, or at least that's how it comes across, that because some people failed to prepare for energy bills of £4,000 per year that they're to blame.

 

[Lost property]

It's not going to be earning huge amounts of interest with rates as they are.

The conspiracies are fun, but the reality is the rather more boring fact that the algorithms setting the DD level aren't designed for such volatile prices.

Unfortunately, I am hard nosed when it comes to both BS and conspiracy theories ( this isn't having a go at you btw) however, there are four events in which the "official" reports make me extremely sceptical...to say the least

For a major organisation, even allowing for "GIGO", if their algorithms are that flawed, maybe some internal investment in IT, instead of paying dividends and effectively rubbing the publics nose in it given the current circumstances would be a good idea.

True, interest rates aren't exactly generous, but, as with another well known brand slogan " every little helps "

 

[Wynd]

It seems potentially somewhat callous to take a view, or at least that's how it comes across, that because some people failed to prepare for energy bills of £4,000 per year that they're to blame.

I am glad you said it first. That post shows a disgraceful, and frankly disgusting, lack of compassion.

There are more than a few elderly people in the UK, living in council homes that are poorly insulated, who scrape by at the best of times. For various reasons they dont have generous pensions, and to respond to them with, they should have saved more, or insulated their homes better...

Il say this, I'm glad this is a conversation over the internet.

Not grasping the argument is one thing. Showing such disregardful for others welfare is quite another. I do hope you have a comfortable and affluent retirement plan in place Snow.


The facts, as they are today, are genuinely deeply concerning.

To think that millions of pensioners will not have virtually any discretionary spend is horrific, sad, and shameful. We are supposed to be a wealthy state.

To make it worse, if we consider the knock on effects of that to the wider economy, we will all feel some of that pain, on top of whatever else is going on in labor markets.

 

[JamesT]

Is it? I'm not sure it's ever been advertised as something which needs to be "topped up" (open to correction). Certainly if you wanted a comfortable retirement with money to spend on nice holidays and with which to spoil the grandkids then having another source of income was going to be required. But to need tops ups just to afford food and heat?

Or never had the opportunity to save "enough" for retirement. I do in general terms agree that people don't make sufficient provision for a comfortable retirement but I find it odd that there is a suggestion you shouldn't expect that a state pension would be enough for you to afford food and heating. That isn't, to me understanding, the position historically nor indeed, I would suggest, should it be accepted to be the position now. Enough to afford fancy holidays? No probably not. Enough to afford heating and food? Yes surely it should? Is that not the point of a Welfare State?

Pension Credit exists, which pretty much by definition implies that the State Pension on its own may not be sufficient. Reading the history of the state pension at https://ifs.org.uk/bns/bn105.pdf mentions predecessor benefits to that existing from at least the 60s, so it's not a new phenomenon that the state pension might be insufficient.

 

[Bletchleyite]

Unfortunately, I am hard nosed when it comes to both BS and conspiracy theories ( this isn't having a go at you btw) however, there are four events in which the "official" reports make me extremely sceptical...to say the least

For a major organisation, even allowing for "GIGO", if their algorithms are that flawed, maybe some internal investment in IT, instead of paying dividends and effectively rubbing the publics nose in it given the current circumstances would be a good idea.

True, interest rates aren't exactly generous, but, as with another well known brand slogan " every little helps "

For what it's worth, if you don't trust their choice you can adjust your DD level online. There are also suppliers (not all) who do monthly actuals, but it does mean you need to budget differently in December from August. Most people actually like the DD plans as it keeps things vaguely consistent, I used to do actuals but switched to a plan when I switched my bank to Monzo, because it nicely handles working out what you have left to spend providing bill outgoings are largely consistent.

 

[Yew]

Agree that all this should be done, but don't think it is conceivable within you timescales, purely from a manpower viewpoint, the rows and rows of Victorian terraced houses in the north will require huge amounts of work

Maybe it’s time that we accepted that ancient terraces are no longer suitable for modern ways of life.

 

[ainsworth74]

Pension Credit exists, which pretty much by definition implies that the State Pension on its own may not be sufficient. Reading the history of the state pension at https://ifs.org.uk/bns/bn105.pdf mentions predecessor benefits to that existing from at least the 60s, so it's not a new phenomenon that the state pension might be insufficient.

True true though the New State Pension that's been around since April 2017 is pitched at a level that most won't get it. The full new State Pension is £185.15 per week whilst Pension Credit tops up to £182.60 per week. A single person getting the new State Pension won't get Pension Credit and neither will a couple where both get a full new State Pension as the couple rate of Pension Credit is £278.70 per week (this is ignoring any extra amounts built into an award of PC due to disabilities, children or caring responsibilities, to keep it simple!). Of course the old State Pension was pitched at a lower level (£141.85 per week at the moment) but that itself was often topped up by various mad additions and allowances meaning the State Pension you got was often at a higher level than just £141.85 per week. But yes that's a fair point.

As to the history it all gets quite tangled but I believe a lot of the old National Assistance and then later Supplementary Benefit support was aimed at people who, for whatever reason, hadn't managed to qualify for a State Pension (or a full State Pension at least) or had extra needs on top (such as those caused by illness and disability) rather than necessarily toping up every pensioner because the basic level of the State Pension wasn't enough. I don't have time to read through that document in detail right now though it does, to the benefit geek in me, look interesting so thanks for sharing!

In any event, however, my main contention would remain that it is still wrong to suggest that it is a failure on the part of the individual to plan that is at fault for people who are going to be struggling to feed themselves and heat their homes. Again, in what universe was anyone planning for £4,200 in energy bills per year decades ago when such arrangements would have started to have to have been made? How can we therefore condemn that failure of imagination now? How can a Welfare State that allows people to face that choice pass muster as a safety net at all?

 

[Busaholic]

True true though the New State Pension that's been around since April 2017 is pitched at a level that most won't get it. The full new State Pension is £185.15 per week wahilst Pension Credit tops up to £182.60 per week. A single person getting the new State Pension won't get Pension Credit and neither will a couple where both get a full new State Pension as the couple rate of Pension Credit is £278.70 per week (this is ignoring any extra amounts built into an award of PC due to disabilities, children or caring responsibilities, to keep it simple!). Of course the old State Pension was pitched at a lower level (£141.85 per week at the moment) but that itself was often topped up by various mad additions and allowances meaning the State Pension you got was often at a higher level than just £141.85 per week. But yes that's a fair point.

I'm on the old State Pension, with no provision for substitution by the new one - it means I lose £42.50 pw in comparison. The total I get has three components, the first being the basic State Pension, the other two are supplementary allowances as you've alluded to, and they only increase by 1% p.a. as they're not covered by the 'triple lock.' There is so much ignorance among the general population on the subject.

 

[ainsworth74]

I'm on the old State Pension, with no provision for substitution by the new one - it means I lose £42.50 pw in comparison. The total I get has three components, the first being the basic State Pension, the other two are supplementary allowances as you've alluded to, and they only increase by 1% p.a. as they're not covered by the 'triple lock.' There is so much ignorance among the general population on the subject.

Indeed and the benefits system in general! I was dealing with someone today who was shocked to discover that as someone aged 30 in a private rented property the Government would only pay them a "shared accommodation" rate rather than that for a one bedroom property (applies until they reach 35 with a few specific exceptions). In your case I hope/assume that you have some other income either yourself or with a partner as otherwise get yourself a Pension Credit claim in!!

 

[Howardh]

How is someone on a state pension going to be able to deal with this? £4000 is as near half of that?!

Many will not have a choice to pay for heating, particularly those this far north. Turnign the heating on when its -20 out isnt exactly a choice.

And of course "tax reduction" won't touch a pensioner on around £10k, or very little up to £20k if they have another pension.

Been chatting about this with pals, the thought being that many simply won't switch any heating on at all and relying on blankets and hot water bottles. Some of the poorest may get help (if known to the authorities) but those just above the help thresholds, and too proud to ask for help??

And even if they did ask for help, what can anyone do??

Anyhow, here's my budget for October - September.

Currently paying in £110/month. I am £800 in credit, thanks to a decent summer here so the heating's not been on at all. We were promised £400 from Richer Sunak. So that's £2520 to last a year, basically 6 summer months @ £110/m (£660) and £1860 to cover the six winter months (c.£300/m). Hope that's enough, I intend to get away to the winter sun for at least 4 winter weeks so hopefully that will cut down the bill at home. Otherwise money would have to come from my "holiday fund" into the "keep warm" fund.

 

[Snow1964]

It seems potentially somewhat callous to take a view, or at least that's how it comes across, that because some people failed to prepare for energy bills of £4,000 per year that they're to blame.

It wasn’t supposed to come across that way, I have retired early (after being made redundant), and I too didn’t prepare for £4000 energy bills, but I am going to have to find a way. I don’t even get any state pension (still too young) or benefits (penalised for sensibly saving as savings stop you getting it).

If I wanted to be callous I could cut my donations to food banks and charity, but my point is no one saw it coming and expecting the Government to bail out individuals (by taxing the next generation) is not a way to share out the pain.

 

[ainsworth74]

It wasn’t supposed to come across that way

Fair enough

or benefits (penalised for sensibly saving as savings stop you getting it).

Yes, that's another thing that's not been touched in quite a long time now the cut-offs for savings and capital in means tested benefits have been £6,000 (after which an assumed income is applied of £1 for every £250 over) and £16,000 (after which no entitlement remains) for at least as long as I've been aware of them and that's around ten years now (a cursory examination of legislation.gov.uk suggests it was probably fixed sometime in the 00s so I'd wager at least fifteen years ago). Surely time for review I'd have thought? You're not the first person I've come across that feels, justifiably, penalised for doing the right thing.

my point is no one saw it coming and expecting the Government to bail out individuals (by taxing the next generation) is not a way to share out the pain.

In which case though what do we do? For those which can't just "find a way"? Let them starve? Freeze? Hope that it all works out okay in the end somehow?

 

[HSTEd]

Ultimately the British public have been voting for Thatcher's energy policy for 40 years.

Now we are where we are.

 

[JamesT]

I've seen the LibDems have suggested freezing the cap and basically letting all the existing utility companies go bust, ala Bulb.
This does seem attractive as it protects the consumer. But would probably end up costing us collectively more. Apparently Treasury rules about government insuring mean that Bulb isn't allowed to hedge, so has been buying gas on the spot market. Hence it's cost about £1bn in support so far, scale that up to everyone and that starts getting pricey.

 

[Trackman]

Indeed and the benefits system in general! I was dealing with someone today who was shocked to discover that as someone aged 30 in a private rented property the Government would only pay them a "shared accommodation" rate rather than that for a one bedroom property (applies until they reach 35 with a few specific exceptions).

Is this universal credit?
I thought people could receive housing benefit from council if on low wage/earnings.
--
I'm just paying flexible D/D at the moment .. I'll worry when winter comes.
This could be an absolute disaster for the government, well.. the country, if people start popping off due to the cold weather.

 

[Xenophon PCDGS]

We are supposed to be a wealthy state.

Where did that supposition come from and to whom does it relate? If you look at the amount of National Debt and the current interest payments now payable, the stated wealth is a false statement.

 

[Bletchleyite]

Where did that supposition come from and to whom does it relate? If you look at the amount of National Debt and the current interest payments now payable, the stated wealth is a false statement.

National debt is not necessarily a bad thing. It's a secure means of saving e.g. National Savings are national debt.

 

[najaB]

Where did that supposition come from and to whom does it relate? If you look at the amount of National Debt and the current interest payments now payable, the stated wealth is a false statement.

Because the UK is a wealthy state. Sixth largest GDP of all countries globally, 20th when ranked by GDP per capita. Yes, we have a large national debt, but we also generate a lot of tax income to meet the payments.

Of course, our current government seems hell-bent on dragging us down the lists, but that's for another thread.

 

[Baxenden Bank]

9/8/22: Cornwall Insight: the typical domestic customer is likely to pay £3,582 a year from October, £4,266 from January, £4,426 from April. It expects bills to begin easing next summer, to £3,810 in the third quarter and then £3,781 in the final three months of next year.

Source: various online news articles

Oh how I am laughing [sarcasm alert] at that 'easing next summer', the amount still being merely 3.6 times the October 2020 figure!

OFGEM price cap period	headline cap amount
October 2020	£1,042
April 2021	£1,138
October 2021	£1,277
April 2022	£1,971
October 2022 (predicted)	£3,582
January 2023 (predicted)	£4,266
April 2023 (predicted)	£4,426
July 2023 (predicted)	£3,810
October 2023 (predicted)	£3,781

@ainsworth74 : the cut-off was £12,000 in 2011 as I recall.

The news reports always refer to 'help for those on low incomes'. This is not quite correct, it actually applies to those on low incomes who have savings below the figures mentioned by Ainsworth74. If you have savings above £16,000 you are expected to use those first. Similarly if you are on a personal pension (or living off savings) but under state pension age you can whistle for help (beyond the standard £150 and £400). Remember lots of people have, essentially, been forcibly retired early from the public sector due to austerity since 2010. Yes, a 65 year old can go and get a job, the employment market is tight, any 65 year olds on here fancy running round picking orders in a fulfillment warehouse 12 hours per day?

It's fair enough to say that those without savings should be assisted ahead of those that have savings, but consider this. The savings that people have may well be needed to pay for future large expenses on their home (windows, roof, bathroom, replumbing, rewiring etc), it is public policy to keep people living independently as long as possible. Handing over to your energy company £3,000 or so per year now means that money is no longer available for those expenses. A future of old people living in rotting, unsafe houses beckons. Then there are future ill-health related costs (taxis needed to hospitals poorly served by public transport) for tests, out-patients and the like. Finally the money could have gone towards nursing home costs. A financial timebomb for the future.

And what is this extra paying for? The gas being pumped out of the ground today in reality could cost the same as it did 12 months ago, with just an inflation based increase for actual production costs. Someone, somewhere is making a very large amount of money on the back of this situation.

 

[Bertone]

I'm on the old State Pension, with no provision for substitution by the new one - it means I lose £42.50 pw in comparison. The total I get has three components, the first being the basic State Pension, the other two are supplementary allowances as you've alluded to, and they only increase by 1% p.a. as they're not covered by the 'triple lock.' There is so much ignorance among the general population on the subject.

Yes, I would agree in previous years there was a difference in % increases in other pension components , but in April 2022, I think you will find that not only did the basic State Pension increase by 3.1% but the other components (“supplementary allowances”) as well.

 

[Mcr Warrior]

Someone, somewhere is making a very large amount of money on the back of this situation.

The majors such as Petrochina, Saudi Aramco, Exxon Mobil, BP, Royal Dutch Shell and Total presumably? Not sure if the likes of Rosneft, Gazprom and Lukoil have also been able to cash in, due to the imposition of trading sanctions.

 

[duncanp]

I've seen the LibDems have suggested freezing the cap and basically letting all the existing utility companies go bust, ala Bulb.
This does seem attractive as it protects the consumer. But would probably end up costing us collectively more. Apparently Treasury rules about government insuring mean that Bulb isn't allowed to hedge, so has been buying gas on the spot market. Hence it's cost about £1bn in support so far, scale that up to everyone and that starts getting pricey.

This is what the French government have done.

They limited the price increase in France to 4%, with the result that the energy company that supplies about 85% of the market has had to be nationalised.

The French government will subsidise the difference between the price being charged to the consumer and the price paid on the open market for electricity and gas.

The cost of this subsidy will ultimately be borne by the French taxpayer, which means that France will be saddled with a huge debt in the future.

If we were to do this in the UK, then the cost would be borne by the taxpayers of the future, with consequences for pensions, economic growth and public spending in maybe 20 years time.

 

[najaB]

The gas being pumped out of the ground today in reality could cost the same as it did 12 months ago, with just an inflation based increase for actual production costs. Someone, somewhere is making a very large amount of money on the back of this situation.

As you said the actual cost of production hasn't changed - so it's 95% profiteering.

 

[Sm5]

Energy prices doubling in a year isnt just affecting the elderly.
if youve a mortgage, and your interest rates just jumped £100-200 a month, a similar increase in energy, and similar climbs in council tax and fuel, food is gong to hurt.

The bigger picture is can the UK shoulder that burden, keep an economy that international investors feel the UK can sustain ?

Whilst the BoE can wax lyrical its reasons for interest rate hikes, its the likes of Goldman Sachs etc that can push it.

Other countries just arent experiencing the same pain, as not all inflationary elements are in the place in all other countries.. the UK has an extraordinary way of putting itself into intensive care when other countries sneeze.

i’m awaiting next the doubling of water rates…

 

[ainsworth74]

Is this universal credit?
I thought people could receive housing benefit from council if on low wage/earnings.

Yes that's Universal Credit but the rules exist within Housing Benefit too.* Though HB these days is only really available to people already on it or pensioners. New claims for HB are pretty much impossible outside some extremely limited circumstances. So if you're working age (which someone under 35 clearly is ) then you'd be making a claim for Universal Credit if you needed help with housing costs unless you were already on HB.

*Note: This particular provision applies to private renters only. If you're in social housing (i.e. from a Housing Association, Council or similar) then it's the Bedroom Tax (a 14% reduction for one 'spare' bedroom and 25% for two or more 'spare' bedrooms) you have to worry about as there is no fixed maximum that will be paid towards rent like there is in the private rented sector.

@ainsworth74 : the cut-off was £12,000 in 2011 as I recall.

Aha interesting! That would have been around two years before I started to become familiar with this sort of thing. If I remember I met ferret out some old resources and have a poke and see when the thresholds did change. In any event, at least its not quite as long ago as I thought. Still quite a while though.