Australia markets close in 4 hours 12 minutes

    +9.10 (+0.13%)
  • ASX 200

    +1.10 (+0.02%)

    -0.0006 (-0.09%)
  • OIL

    -0.57 (-0.63%)
  • GOLD

    -3.90 (-0.22%)

    +573.32 (+1.71%)
  • CMC Crypto 200

    +11.27 (+2.08%)

    -0.0003 (-0.05%)

    +0.0011 (+0.10%)
  • NZX 50

    +7.70 (+0.07%)

    -48.54 (-0.37%)
  • FTSE

    +42.63 (+0.57%)
  • Dow Jones

    +29.04 (+0.09%)
  • DAX

    +113.79 (+0.84%)
  • Hang Seng

    -55.71 (-0.28%)
  • NIKKEI 225

    -210.65 (-0.75%)

1 million pensioners risk missing out on Rishi Sunak’s one-off £650 payment

·Finance Reporter, Yahoo Finance UK
·8-min read
British Chancellor of the Exchequer Rishi Sunak speaks at a statement on the economic update session, at the House of Commons in London, Britain March 23, 2022. UK Parliament/Jessica Taylor/Handout via REUTERS  ATTENTION EDITORS - THIS IMAGE HAS BEEN SUPPLIED BY A THIRD PARTY. MANDATORY CREDIT. IMAGE MUST NOT BE ALTERED.
Rishi Sunak said total the cost of living support package is worth £15bn. Photo: UK Parliament/Jessica Taylor/Handout via Reuters

Chancellor Rishi Sunak has unveiled a new £15bn emergency package of measures to support households through the cost of living crisis but some pensioners risk missing out.

The government said pensioner households will receive an extra one-off Pensioner Cost of Living Payment of £300 to help with their bills and living costs, while more than 8 million low-income households on means tested benefits – which includes those receiving Pension Credit – will receive a one off £650 payment.

“While this is a much needed helping hand, according to Age UK nearly a million pensioner households are entitled to but do not receive normal Pension Credits and so could miss out on the additional £650 payment,” Jon Greer, head of retirement policy at Quilter, warned.

Read more: Rishi Sunak unveils £15bn aid to help UK households struggling with rising energy bills

DWP figures from February 2022 show that there were 72,000 fewer recipients of normal Pension Credits against the previous year and nearly two thirds (65%) of people getting Pension Credit were women.

“There are numerous reasons why pensioners don’t claim their credits including a lack of awareness, feeling like they would not qualify and simply feeling that they do not want to take up the benefit because of a negative attitude to asking for help or feeling like a burden to the state.

“However, the message is clear if you don’t claim the credit, you won’t get the help and the government need to look at how they can publicise it effectively to qualifying pensioners. Even Sunak in his speech recognised that people would still fall through the cracks and not benefit from this policy even if eligible,” Greer added.

“There is at least a little light at the end of the tunnel for pensioners who heavily rely on the state pension, as once the triple lock is reinstated next year pensioner income will be uprated to match the unique inflationary environment, we are living in. However, until then, pensioners are suffering one of the worst disparities in their income versus the inflation rate ever. As the cold weather draws in after the summer and the huge rises in energy prices really start to bite, times will no doubt be incredibly tough for everyone, and this one off payment is laudable move from the government.”

Read more: 2 million pensioners face poverty amid spiralling energy bills, warns Age UK

Sunak also announced that the £200 burn-now-pay later loan has been doubled to £400 and turned into a grant that doesn’t have to be repaid.

“The government has offered a lifeline to millions of people struggling to keep their head above water. There’s no doubt that this will help keep many families afloat, especially those in the most desperate circumstances, some of whom will see state support that matches the rising cost of energy. However, choosing to deliver a series of lump sums will still leave many people facing enormous challenges,” Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said.

“The government argues that by delivering lump sums instead of uprating benefits to match inflation, it means people will receive more this year. However, on the flip side, uprating them would have fed into higher benefits and pensions next year and beyond, whereas the lump sum is a one-off, so this is effectively the government opting to pay less over the longer term.”

The TUC described the announcement from Sunak as “badly needed”, but criticised the government for not having a long-term plan to raise living standards. Frances O’Grady, the TUC general secretary, said: “The chancellor should have acted far sooner after his inadequate spring statement. His dither and delay has caused unnecessary hardship and worry for millions. While today’s intervention is badly needed, we should have never been here in the first place …

“With energy bills rising 23 times faster than wages we urgently need to get pay packets rising and to pay universal credit at a permanently higher rate – not just a one-off boost. That’s the best way to protect livelihoods and to support the economy.”

The CBI, which represents businesses, has said that while support for people with bills is welcome, it is not happy about Rishi Sunak’s windfall tax.

“Helping people facing real hardship amid one of the worst cost-of-living crunches in recent memory is the right thing to do,” CBI’s chief economist, Rain Newton-Smith, said.

Despite the investment incentive, the open-ended nature of the energy profits levy – and the potential to bring electricity generation into scope – will be damaging to investment needed for energy security and net zero ambitions.

Read more: FTSE 100: Sunak's windfall tax fails to dent energy companies' share price

It sends the wrong signal to the whole sector at the wrong time against a backdrop of rising business taxation elsewhere.

The government must work with business on a genuine plan for increasing business investment and get growth going again, particularly in areas like energy efficiency.

The British Chambers of Commerce has said there should have been more help for business.

“Unless steps are also taken to ease business costs, they will likely feed into the inflationary pressure on the economy and quickly eat into the financial support announced today,” Hannah Essex, BCC co-executive director, said.

“A reduction in VAT to 5% on businesses’ energy bills would directly alleviate some of this pressure to raise prices.”

Paul Kissack, chief executive of the Joseph Rowntree Foundation, the poverty charity, said: “For people living with worry and fear through this cost of living crisis, and especially for those going without essentials, today’s statement will offer very welcome relief. It is right to target help at those on low incomes, who are least able to bear the shock of soaring energy bills.

“We are pleased by the commitment to uprate benefits in line with inflation as usual, though it is still crucial that the government invests on an ongoing basis in ensuring that everyone can get through difficult times and afford the essentials.”

John McDonnell, the former shadow chancellor, said the £15bn isn’t enough to help UK households through the cost of living crunch.

Sunak had resisted a windfall tax but concluded that the levy was needed to help fund a package of measures to help all households cope with the cost of living crisis.

Russ Mould, investment director at AJ Bell, commented on the windfall tax on the profits of energy companies.

As the public clamour for someone, somewhere to do something grows, it is therefore not surprising that the Government’s latest policy U-turn should focus on a windfall tax.

“A windfall tax and targeted support for those that need it the most looks like good politics and it may provide economic relief too, in the near term.

“However, this short-term solution must be complemented by long-term planning and the Chancellor has gone some way to addressing that with the new Investment Allowance which is designed to incentivise oil and gas firms to invest by saving them 91p via tax relief for every £1 they invest.”

Read more: Rishi Sunak £15bn support package to cut every energy bill by at least £400

Jamie Maddock, energy analyst at Quilter Cheviot, added: “Sunak decided not to include renewable energy firms within the scope of the tax, leaving the burden on oil and gas producers. While a 25% levy may seem extreme, it comes with a generous opportunity to offset these charges with extra tax relief on investment. The government were clearly afraid these firms would abandon their investments in the energy transition and renewable space so felt compelled to offer a carrot to go along with the stick.

“However, despite the attractive tax breaks for investment, it is unlikely to meaningfully incentivise a change in attitude towards investing in UK energy.

The Resolution Foundation said the £15bn package of energy bill support almost doubles that announced earlier in the year and rightly fills the gap they left by prioritising those hit hardest by the cost-of-living crisis

“The chancellor has announced a big and very welcome package of support for households facing fast rising energy bills. It almost doubles the level of energy support to over £30 billion, and fills the huge gap in previous announcements with large targeted support for those hit hardest,” Torsten Bell, chief executive of the Resolution Foundation, said.

“The decision to provide one-off payments this year to poorer households, pensioners and those with a disability is a good attempt to target those with higher energy bills – although the relative lack of support for larger families stands out.

“The chancellor’s commitment to uprate benefits next April in line with very high inflation also offers important security for lower income households that their living standards will be protected from surging prices tomorrow as well as today.”

Watch: Sunak unveils £15bn package and U-turns on windfall tax to help Britons 'hit hard' by cost of living surge

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting