Retirees to spend more than £151 a month on energy this winter
Key Points
- Ofgem raises the energy price cap 4% to £1,723 a year from 1 October
- Retired households will spend around £1,814 a year, or £151 a month
- The rise adds almost £70 a year to a typical retiree's energy spending
- Electricity VAT drops to 0% for six months from 1 October
- Fixed-tariff customers and Northern Ireland households are unaffected
Retired households will spend around £1,814 a year on energy from October after Ofgem raised the price cap by 4%.
The regulator confirmed on Wednesday (26 August) that the cap for a typical dual-fuel household paying by direct debit rises from £1,663 to £1,723 a year for the period covering 1 October to 31 December.
That works out at roughly £5 a month, or £60 a year, on the average bill.
Quilter’s Retirement Lifestyle Report found retired households already spend an average of £145.34 a month on energy, or £1,744.10 a year. The 4% increase adds almost £70 a year, taking their annual energy spending to around £1,814, or more than £151 a month.
“While an increase of around £6 a month may not sound significant in isolation, for many pensioners it is another addition to a growing list of household costs at a time when budgets are already under pressure,” said Ian Futcher, financial planner at Quilter.
“Many retirees rely on fixed incomes and have limited scope to offset higher costs through additional earnings, meaning even relatively modest rises in essential bills can have a meaningful impact on day-to-day affordability.”
Futcher said the extra cost has to come from somewhere else for some households, whether that means cutting back on discretionary spending, dipping into savings or reducing financial support for family members.
New unit rates and standing charges
New unit rates and standing charges:
- Electricity: 26.32p per kWh, up from 26.11p
- Electricity standing charge: 54.83p a day, down from 57.19p
- Gas: 7.97p per kWh, up from 7.33p
- Gas standing charge: 29.68p a day, up from 29.04p
Rates vary by region. Electricity figures now exclude VAT, which the government removed from domestic electricity bills for six months from 1 October to 31 March 2027. Gas still carries VAT at 5%.
Prepayment customers face a 4% rise to £1,678 a year, while those who pay on receipt of a bill move to £1,861.
“High international gas prices are continuing to drive energy costs in the UK,” said Neil Kenward, director general for markets at Ofgem. “We welcome the government’s intervention to remove VAT from electricity bills, without which customers would have faced even higher costs this winter.”
MoneySavingExpert founder Martin Lewis calculated that the October cap leaves rates nearly 17% higher than they were in April, across the high-use winter quarter, and at their highest level since winter 2023.
The cap applies only to households on standard variable tariffs. Anyone on a fixed deal, and all customers in Northern Ireland, sits outside it.
Energy Secretary Miatta Fahnbulleh pointed to the expanded eligibility for the £150 Warm Home Discount and the government’s Warm Homes Plan as support for households facing higher bills.
“It’s a timely reminder that retirement planning should not only focus on funding lifestyle goals, but also on building resilience against inflation and unexpected increases in core household expenses,” said Futcher.
“Regularly reviewing income sources, spending patterns and cash reserves can help ensure retirement finances remain on track when essential costs rise.”
