The Scottish Mail on Sunday

Heating costs are soaring – but here’s why you shouldn’t stop paying the bill

...or halt pension contributi­ons

- By SIMON LAMBERT EDITOR OF THIS IS MONEY

THE bad news on bills and inflation keeps flowing thick and fast, with the energy price cap rises sending household costs soaring at the same time as price rises elsewhere bite.

Britain has rapidly switched from a nation looking forward to a lockdown savings-fuelled Roaring Twenties post-pandemic boom, to one fearing a painful recession that hammers household finances.

Energy is a major driver in Britain’s scarily high inflation forecasts, but the cost of much of the rest of essential living is also rising.

That high inflation is leading the Bank of England to rapidly raise interest rates – hitting anyone hoping to move home or needing to remortgage – and worrying those whose fixed-rate deals will one day end in a much higher rate environmen­t than they expected.

Amid all this gloom, it’s hardly surprising there is evidence coming in of people starting to hunker down. But while trimming nonessenti­al spending and making sure you have a healthy rainyday pot is a wise move if you are worried about higher bills to come, there are some false economies you should beware.

Here is a handful:

IGNORING INVOICES WILL ULTIMATELY LEAD TO CREDIT PAIN

A RAFT of social media campaigns have popped up that involve not paying your bills in some way or another (some feature dubious claims about how legally enforceabl­e some of those payments are).

Stopping paying your bills is not a wise move: it leads down a path that can damage your credit rating for a long time, involve mounting debts that become unmanageab­le, threats from debt collectors and lots of other problems.

If you can’t afford to pay your bills, speak to your utility firm and ask for help with a payment plan and potentiall­y seek assistance from Citizens Advice.

ONLY PAYING FOR ENERGY USED WILL MEAN HIGHER BILLS IN COLDER MONTHS

THIS is a tricky issue, as some customers feel energy firms are asking for way more per month than they should on direct debits. However, direct debit payments are structured in a way that you overpay in the warmer months to cover the more expensive colder ones.

Cutting back to pay only for what you use now is likely to lead to even more problems once the weather gets cold, as you have no buffer to help. It is also worth noting that the energy price cap is lower for direct debits.

NOW IS THE TIME TO DOUBLE DOWN ON FINANCE – DON’T BIN YOUR BUDGET

WHEN costs are rising rapidly and life seems increasing­ly tough, it’s easy to think: ‘I just won’t bother trying to get on top of things, there’s no point.’ Often that leads to people giving up on budgeting.

This may feel momentaril­y liberating, but over the longer term it will lead to financial pain. Now is the time to double down on getting your head round your incomings and outgoings and a firm grasp on where money is going. It’s time to get a budget, not bin the idea.

CUTTING BACK ON YOUR PENSION PAYMENTS WILL COST YOU DEAR

AUTO-enrolment has dramatical­ly increased the number of workers saving into a pension, but reports are filtering through of more cutting back on payments.

If you cut back on your pension, you not only risk never starting it up again but will also miss out on free money in the form of the contributi­ons your employer makes and the tax relief that automatica­lly adds at 25 per cent to the money you put in (higher rate taxpayers can claim back more).

Clearly, if you are really struggling then diverting your pension contributi­on can help make ends meet, but always try to avoid cutting paying into your pension if you can – it’s very tempting not to start again and will cost you in the long run.

AS HARD AS IT IS, DO YOUR BEST TO KEEP SAVING AND INVESTING

MOST people don’t have the spare hundreds of pounds a month that the rise in energy bills will eat up, so inevitably meeting those bills will dent the amount they can save or invest each month.

But if you do need to cut back on this, instead of axing saving or investing altogether, try to just dial it down with a commitment to dial it back up when you can.

The benefits of long-term regular saving and investing are immense, with compoundin­g playing its part in magnifying gains.

It’s better to avoid falling out of the habit altogether.

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