‘The pain hasn’t even started yet’: Energy price cap to hit £4.2k

‘The pain hasn’t even started yet’: Energy price cap to hit £4.2k

Energy bills for the typical UK household are set to reach £4,266 annually in 2023, jumping more than 250 per cent since the beginning of this year.

Consultancy Cornwall Insight said today (August 9) many energy suppliers are under financial pressure against the backdrop of “unprecedented” market conditions, with some currently making a loss.

It said a further change to the price cap would help to curb the threat of another flurry of energy suppliers exiting the market, the cost of which would ultimately be picked up by consumers.

The latest predictions, which were based on Ofgem's new methodology, “won’t go unnoticed by many”, including clients, according to IFAs.

“It’s another eye-watering increase and a blow for many individuals and families across the country who are already financially stressed,” said financial adviser at Morgan Williams & Co Daniel Williams. 

“My concern for consumers is the ever-moving floating target. That however much they have already adjusted their lifestyles to date, in some cases only just allowing them to pay their bills, the pain hasn't really even started yet.”

Williams regularly talks to his clients about rising energy prices, as this topic forms a growing part of his firms’ advice conversation. 

“In my own family, we are fortunate to still be in a two-year energy contract, so we won’t feel that pain until July 2023. But that doesn't mean we won't feel the effect of the rises. 

“For example, our two-year-old daughter attends a local nursery, and at some point their prices will have to go up to reflect the increase in their bills.”

In general, Williams said his clients are well insulated from the price rises, but for some, their financial plans may require some adjustment.

“The rises won't go unnoticed by many,” he said. “It's important that we all help where we can.”

As well as offering some adviser time pro-bono help for individuals, Williams’ firm has made - and intends to continue making - a handful of financial donations to local food banks over the past year.

A number of IFAs have also stepped in to help employees, offering pay rises, one off ‘top-ups’, and staggered payments to off-set inflation.

Meanwhile, specialist income protection provider Holloway Friendly has announced it will offer members the ability to pause their insurance and payments for up to six months. 

‘Wealthy millionaires’ could feel pinch

With the majority of IFAs’ clients holding anywhere between £100,000 and millions in assets, it would be easy to discount this bracket of consumers from the impact of energy price cap rises.

But Perceptive Planning managing director Phil Billingham said even “our ‘wealthy millionaire[s]’ could certainly see their living costs rise” by as much as 10 per cent on fuel alone.

“If you assume that energy costs have gone up by around £300 per month, and that net maximum interest rates are 2 per cent, then to absorb that increase would require an additional £180,000 to be placed on deposit. So that’s not going to happen,” said Billingham.