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This article is the last part of the FT’s Financial Literacy and Inclusion Campaign

The announcement of Ofgem’s energy price cap on Friday could not have come at a worse time for Chancellor of the Exchequer Rachel Reeves. The unwelcome news that the average annual energy bill will rise by 10 per cent this winter has intensified anger over the withdrawal of winter fuel payments from 10 million British pensioners.

Her controversial decision to make energy support means-tested means only the poorest pensioners – those eligible for pension credit – will now receive an annual payment of £200-£300, saving an estimated £1.5 billion.

Let’s make better use of existing government data to identify and contact the 880,000 households that we know should receive additional help

I have argued before that universal fuel subsidies are badly targeted: wealthier pensioners don’t need the money, and Reeves is right to reform the system to ensure that help goes to those who really need it. But charities warn that the threshold is too low, and that 880,000 low-income households with pensions will miss out this winter because they are not claiming pension credit. This is a political disaster in the making, and the government’s new awareness campaign, while welcome, will not solve the problem.

A faster, more effective way? Instead of cheerfully telling pensioners to apply, we could use existing government data to identify and contact the 880,000 households that we know should receive extra help.

There is a very simple way to do this, says former pensions minister Sir Steve Webb. Change the laws on data processing and up to 250,000 missing claimants could be identified and put on benefits “in one fell swoop”.

How? If pensioners apply to their local authority for means-tested benefits, such as housing benefit or council tax relief, Webb argues that the law should be changed so that the same data can simultaneously enter an automatic assessment for pension credit by the Department for Work and Pensions.

There is growing evidence from councils across the UK that encouraging pensioners on one means-tested benefit to claim another is an effective way of targeting those who fall through the cracks (more on this later). But the simplicity of Webb’s method would go even further, removing a layer of bureaucracy and ending the current need for pensioners to submit two lengthy but similar benefit claims to get the help they are entitled to.

There’s just one problem. The average pension claim is worth £3,900 a year. So if this method is as effective as Sir Steve claims, it could jeopardise the Chancellor’s projected £1.5bn winter fuel savings.

Reeves stressed this week that she wants retirees to “get the support they deserve” and using data more intelligently would do just that. But that’s not the only way targeted insights can be used to identify claimants.

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Poor uptake of pension credit has been a persistent problem for years, and raising awareness is only part of the solution. Charities say the sheer complexity of the UK benefits system (and how different parts of it work together) is a major hurdle. Those who Are entitled to benefits often face challenges with the application process, compounded by digital exclusion. On top of all this, there is a generational stigma that prevents many older people from asking for what they see as a tip.

The DWP has yet to release the results of its own data-sharing pilot with 10 UK councils, which sent letters inviting people to apply to pensioners who were already claiming housing benefit but not yet receiving pension credit.

According to research by the charity Independent Age, other similar schemes have proven highly successful.

For example, the London Borough of Islington ran three targeted pension credit campaigns using its own benefit analysis software to analyse datasets from local authorities and the DWP, identifying hundreds of low-income households who could be eligible but were not yet claiming. So far, this has unlocked £1.6m in new annual benefit entitlements.

Glasgow City Council has focused on encouraging applications for Care Allowance. Those who qualify are often eligible for Pension Credit, as it significantly raises the minimum income threshold required to claim (the same applies to other disability benefits and Carer’s Allowance, although many people are not aware of this).

So Glasgow used its own data and DWP records to target pensioners with letters setting out a date and time for a benefits adviser to call. It was not uncommon for people to call the helpline intending to cancel the appointment, but then decide to go ahead after learning how much support they could potentially receive. By February 2023, residents receiving support were on average more than £6,000 a year better off than before.

Joanna Elson, Chief Executive of Independent Age, says local governments have a key role to play in connecting with communities on the ground and calls on the government to increase funding for data-driven projects.

Other councils have sent out concept letters to raise awareness among local GPs or housing associations, who can use their own datasets to target older patients and tenants. New pension credit claims in Wales rose by 26 per cent when a leaflet was sent to pensioners renewing their bus passes (note: Wales has an Older Persons Commissioner).

A very important lesson from these trials is the extreme caution of senior citizens to be scammed. Being approached out of the blue by someone offering to increase your income by thousands of pounds a year sounds too good to be true, and it takes time and effort to build trust.

Often, personal contact is needed to help older residents overcome the barriers to applying, and that costs money. Is it right that we rely on charities such as Independent Age, Citizens Advice, Turn2Us, Age UK and others to provide this?

I leave you with two thoughts for the October budget. Even if the finance minister does not implement legal reforms, she should reserve some of the winter fuel savings to fund more data-sharing initiatives.

And if we do see a large increase in benefit claims, what additional resources could the DWP (a department already notorious for its backlogs) be given to process these claims in a timely manner?

Pension credit applications must be submitted by December 21 to be eligible for the winter fuel payment. Let’s hope that pensioners who need it don’t have to wait until next spring to receive it.

Claer Barrett is the FT’s consumer editor; [email protected]; X @Claerb; Instagram @Claerb