What the £400 discount means for household budgets
What the £400 discount under Energy Bills Support Scheme means for household budgets
Consumers are set to benefit from a host of schemes and initiatives aimed at easing the cost-of-living burden this winter.
All households are set to benefit from the Energy Bills Support Scheme which will pay £400 in six monthly payments starting from October 2022.
The average household face spending 8% of their monthly budget on gas and electricity bills with the discount factored in, instead of 11%, according to new calculations by the interactive investor, the UK’s second largest DIY investment platform.
This rises to 16% for poorer households (instead of 23%) and falls to a modest 3% for high earners (instead of 5%).
Energy as % of the household budget in October 2021
Energy as % of household budgets from Oct 2022 WITH £400 grant
Energy as % of household budgets from Oct 2022 WITHOUT £400 grant
Source: Ofgem, ONS Family Spending report. Calculations by interactive investor.
Commenting, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “Every little helps when battling the onslaught of inflation. All households will be given a one-off £400 discount on their fuel bills which will be distributed in six instalments. Starting with £66 in October and November, then £67 every month thereafter with the last payment scheduled for March.
“The £400 discount means the average household will spend 8% of their entire budget on energy bills over the six-month period to the end of March, instead of 11%. This is still up from last winter when spend on gas and electricity bills amounted to 6% of the household budget.
“The situation remains bleak for poorer households. They could spend almost 16% of their budget on energy bills over the same period with the £400 discount taken into account, instead of 23% without it. But this group could still spend twice as much on gas and electricity bills this winter as they did last year.
“For higher earners, the £400 discount means they could spend the same percentage (3%) of their budget on energy bills as they did last year, instead of 5%.
“Crucially, the discount will come off energy bills automatically – you don’t need to do anything. Beware of scam text messages claiming to help recipients claim the £400 energy bills discount.
“All the cost-of-living support schemes and measures will help take the sting out of the squeeze on personal finances, but most have a shelf life. As such, it remains important to have a comprehensive understanding of your financial position and make the necessary adjustments to ensure that your financial position holds strong long after the cost-of-living easing measures expire.
“We are currently in uncharted waters. Hope for the best but preparing for the worst is a good mentality to have during these uncertain times.”
Other cost-of-living easing measures include:
The second and final instalment of the £650 cost-of-living payment is due to be paid to more than eight million low-income households who receive many benefits or tax credits.
Pensioners eligible for the Winter Fuel Payment will get an extra £300 paid with their normal payment from November 2022.
Around six million disabled people in the UK have started to receive their one-off £150 Disability Cost-of-Living payment this month.
Vulnerable families can also claim help through the Household Support Fund, the Warm Home Discount scheme, and hardship funds run by energy companies.
The Financial Conduct Authority (FCA) has announced it has written to insurance industry CEOs to make sure their customers are protected from unnecessary products or add-ons and unfair penalties. When it comes to loans, the FCA says it has reminded 3,500 lenders how it expects them to support borrowers who get into financial difficulty since the cost-of-living squeeze began.