Half of young consumers would consider getting a prepayment meter as new rules make them cheaper
Half of younger consumers (51%) would consider getting a prepayment meter[1] after new Ofgem rules made their default tariffs cheaper than those of standard credit meters, although still more expensive than some fixed tariffs
Overall, a fifth of households (21%) would consider making the swap, while only 5% of over-55s would get a prepayment meter voluntarily[1]
More than half of households (56%) didn’t know that prepayment meter default tariffs are now £47 cheaper than standard variable tariffs on average, since April 1[2]
The number of prepayment meters has fallen 8% from their peak in 2019, with seven million gas and electricity prepayment meters currently in action[3]
10,000 prepayment meters are installed every month, freedom of information request reveals[3]
Uswitch advises households to carefully weigh up the pros and cons before taking a prepayment meter and to consider alternative, cheaper fixed tariffs.
Half of younger consumers (51%) would consider getting a prepayment meter[1] after new Ofgem rules made their default tariffs cheaper than the equivalent tariffs for standard credit meters, reveals research by Uswitch.com, the comparison and switching service.
Prepayment meters have traditionally been a more expensive way of paying for energy, but new unit rates and standing charges from April 1 mean their default tariffs will cost less than other types of meter. More than half of households (56%) don’t know about the change[2].
While prepayment meter default tariffs are cheaper than standard variable tariffs, suppliers like EDF Energy have started offering fixed deals lower than the price cap, making such offers a cheaper option for most households.
There is a generational gap when it comes to prepayment meters, with consumers aged 18 to 34 most open to the idea of one, whereas only 5% of over-55s would consider swapping to one to potentially get cheaper energy. Overall, a fifth of households (21%) would consider getting a prepayment meter due to the new cheaper default tariff rates, but more than half (52%) are firmly opposed to having one[1].
Two thirds of those considering changing to a prepayment meter (64%) would make the move if it meant they could save money on their energy bills, while a third of younger consumers (37%) would make the change if it stopped them from building up energy debt[4].
Households said they would need to reduce their energy bill by £60 on average to be persuaded to move to a prepayment meter[5]. The average household paying by direct debit will pay around £1,690 per year, based on the current price cap, versus £1,643 for those using prepayment meters — a £47 saving.
The number of prepayment meters has fallen almost 8% from their peak in Q2 2019, with more than seven million gas and electricity prepayment meters currently in action[3].
More than 10,000 prepayment meters are installed every month, freedom of information request reveals[3].
In total, 195,503 prepayment meters were installed in 2023, down 41% from the 332,830 fitted in 2022. Nearly 95,000 of the prepayment meters – almost a third – fitted in 2022 were forcibly installed for debt[3].
Uswitch is advising households to carefully weigh up the pros and cons before taking a prepayment meter, warning of the risk of self-disconnection. Consumers should also consider whether a cheaper fixed tariff would be a better option.
Will Owen, energy expert at Uswitch.com, comments: “Prepayment meters have got a bad reputation among some households, but changes to the price cap mean that their default tariffs are now cheaper than standard credit meters.
“It’s important to remember that this doesn’t mean they’re the cheapest option overall – fixed deals are now being offered below the price cap, which would better suit most households.
“Younger consumers are more open to prepayment meters than older generations, perhaps because topping up is much easier thanks to mobile phone apps and electronic payments.
“With prepayment meters, you pay for your energy before you use it, and while there are emergency provisions, it does mean it is possible to be cut off if you have not put enough money into your account.
“This means that younger consumers and vulnerable people are at greater risk of disconnecting themselves from their energy supply when money is tight.
“Direct debits also allow consumers to spread out their costs evenly throughout the year, meaning bills won’t rise significantly in the winter when energy usage is highest. With a prepayment meter, the cost of energy needs to be paid for up front, which could make it more difficult to budget for during the winter.
“People should weigh up the benefits and drawbacks of prepayment meters before taking the plunge.”
Be the first to hear of the latest energy deals by running a comparison and signing up to Uswitch.com here.
Notes
Research conducted online by Opinium, 22nd to 27th March 2024, among 2,002 UK energy bill-payers, weighted to be nationally representative.
1. Respondents were asked ‘Would you consider switching to a prepayment meter tariff?” 21% said they would consider this. 52% said ‘I would definitely not consider this’. Among 18-34 year olds, 51% said they would consider it. 20% of 35 to 54 year olds would consider this. 5% of over-55s would consider this.
2. Respondents were asked ‘Ofgem, the energy regulator, announced new rates for prepayment meters (PPM), which means that PPM tariffs will be £47 a year cheaper than direct debit default tariffs for the average household from April 1. Were you aware of this before today?’ 56% said they had never heard of it.
3. Uswitch submitted a Freedom of Information request to Ofgem asking: ‘Please can you provide me with:
1) The total number of energy customers who were on prepayment meters in the following years, broken down by month if possible, and split up by gas and electricity. 2) The total number of prepayment meters fitted in the following years, and split up by gas and electricity. 3) The total number of prepayment meters force-fitted for debt in the following years (i.e. number of PPMs installed for non-payment of debt on a warrant visit), broken down by month if possible, and split up by gas and electricity. Full FOI available on request.
4. Respondents who would consider a prepayment meter were asked ‘In what circumstances would you consider moving to a prepayment meter? Select all that apply.’ 64% said ‘I would switch, if it meant I could save money on my energy bills’ 31% said ‘I would switch, if it meant I could never build up energy debt.’
5. Respondents were asked ‘How much would you need to save on your annual energy bills to switch to a prepayment meter?’ Average figure was £59.67.
About Uswitch
Uswitch is one of the UK’s top comparison websites for home services switching, including energy, broadband and mobiles.
More people go to Uswitch to switch their energy, broadband and mobile than any other site, and we have saved consumers over £2.7 billion off their bills since we launched in September 2000.
Free mobile app Utrack also helps households manage their home energy usage and make potential savings.
Uswitch is part of RVU, a group of online brands with a mission to empower consumers to make more confident home services, insurance and financial decisions.