Low-income state pensioners can receive an automatic £150 discount on electricity bills through the Warm Home Discount Scheme, in addition to the VAT cut on energy bills announced by Prime Minister Andy Burnham this week.
The new Prime Minister has unveiled an £850 million tax cut on energy bills, making electricity bills VAT-free for six months from October 1. The move is expected to save households around £45 per year and is partly funded by scrapping the previous government's digital ID project, which had been estimated to cost around £600 million per year over three years.
Pension Credit unlocks Warm Home Discount
Pensioners on a low income can apply for Pension Credit from the Department for Work and Pensions (DWP) to help with living costs, and this also opens the door to cheaper energy bills. Those in England, Wales and Scotland who receive the Guarantee Credit element of Pension Credit are eligible for the Warm Home Discount Scheme, which provides a one-off £150 discount off electricity bills.
The discount is automatically applied to the bill by the electricity supplier. Currently, 28 energy suppliers are part of the scheme, including major firms like British Gas, E.ON Next, EDF, Octopus Energy, OVO and ScottishPower.
Low take-up of Pension Credit
According to the latest government statistics, only 62% of entitled pensioners are currently claiming Pension Credit, meaning take-up remains relatively low. This leaves up to an estimated £2.5 billion in unclaimed funds annually, which amounts to around £2,600 per year for each eligible claimant who did not claim.
Beyond the 4.8% uplift this tax year, Pension Credit also acts as a gateway to other entitlements, including help with housing costs, a Council Tax reduction, free TV licences for those over 75, and access to the Warm Home Discount scheme.
Des Cooney, retirement planning specialist at Axis Financial Consultants, said: “A £150 automatic discount is a meaningful sum for retirees living on a fixed income, yet many eligible state pensioners simply don't know it exists because they haven't claimed the qualifying benefit in the first place.
“Pension Credit, for example, is consistently one of the most underclaimed entitlements in the UK — and unlocking it doesn't just bring in that direct payment; it can act as a gateway to a whole range of additional support.
“Anyone approaching or in retirement should treat a benefits entitlement check as a core part of their financial planning, not an afterthought.”
Warm Home Discount expected to continue
The current Warm Home Discount Scheme is due to reopen in October, with the discount applied to bills by March 31, 2027. Any changes are unlikely, meaning the £150 discount is expected to roll out as planned under Burnham's government. If a change is made, it would likely be announced in the Autumn Budget, expected in late October or early November.
Burnham said in the first meeting of his Cabinet that he will lead a “cost of living government” and wants to give people “a sense that help is coming”, so removing the £150 discount from pensioners would be unlikely.
Burnham said: “Westminster has not been working for people for too long, with families struggling with the cost of living. That needs to change.
“I said I wanted to give people breathing space, and that’s what I’m announcing on my second day as Prime Minister. We’re taking immediate action to cut taxes on energy bills, put more money in people’s pockets and bring back hope.”
