As energy companies make millions on speculative trading, the situation for pensioners in particular has deteriorated since last year.

Reforming the energy market trading system could save households £173.34 per year on their electricity bill, according to a new report.

The report, Tariff Watch – Impacts of Trading, FEA / Warm This Winter, April 2025 (pdf), highlights the role of speculative trading where companies trade energy solely for financial gain without directly delivering electricity to consumers. 

This type of trading can impact overall market prices. Speculative traders attempt to profit from price fluctuations, buying low and selling high, potentially adding to price volatility. Often trading houses are based offshore or structured to avoid direct UK tax obligations, allowing them to operate with fewer tax liabilities compared to domestic companies. This setup enables such firms to retain a larger share of profits. Every trade comes with extra costs like fees and commissions, which ultimately increase household energy bills and can make prices even more unstable.

The researchers recommend that changes are made to the market structure – including a more active role for GB Energy to eliminate market inefficiency in trading. Eliminating these market inefficiencies could save 6.4 p/kWh off every unit of electricity used.

This could potentially save UK electricity bill payers around £4.51 billion annually, with each household saving about £173.34 per year on their electricity bill.

Report author, Dylan Johnson, from Future Energy Associates, commented: “This speculative activity often drives prices away from the true cost of generation, creating added instability that ultimately impacts consumer prices. Key players, including independent traders like Vitol, Trafigura, Gunvor, and Mercuria, have significantly benefited from increased profits, with gross earnings for the sector reaching $148 billion in 2022. This growth was spurred by volatile markets, especially in gas and power, which have now surpassed oil as the primary profit drivers.”

Simon Francis, coordinator of the End Fuel Poverty Coalition, commented: “This report reveals the good, the bad and the ugly sides of market trading. At its worst, trading creates a system that is skewed against consumers with billionaire trading firms, hedge funds and banks profiting from volatile energy prices. “These groups are also gambling with the ability of hard-stretched households to keep warm every winter and put hot food on the table.

“Ministers and MPs should urgently investigate how these firms operate and the impact they are having on energy bills. More widely, the launch of GB Energy should act as an opportunity to reform the trading market so it improves security and brings down the cost of energy.”

Caroline Simpson, Campaign Manager for Warm This Winter, which commissioned the study, added: “Yet again we see how the energy sector trades on people’s misery. It’s unfair and ending this could save UK electricity bill payers around £4.51 billion annually, that’s a much-needed £173.34 per year for households.

“We need reforms like this to kick in urgently,  including making Ofgem get to grips with the industry and closing loopholes that netted a £4 billion windfall for network companies we are demanding is given back to billpayers.”

Campaign responds to government review of fuel poverty strategy

Earlier this month, the End Fuel Poverty Coalition submitted its response to the government’s review of its fuel poverty strategy, calling for sweeping action to help the millions of people struggling to afford to heat their homes.

The campaign warns that unless ministers take immediate steps, people will continue to suffer needlessly in cold and damp homes.  At the heart of the new strategy are calls for long-term investment to improve home energy efficiency, particularly for those most in need. 

The Chancellor is urged to stick to the Labour Party’s election commitment of £13.2 billion to fund a nationwide Warm Homes Plan. This plan would help insulate homes, install low-carbon heating systems, and make energy-saving upgrades more widely available.

Campaigners argue that current schemes are not working fast enough with only 59,000 people lifted out of technical fuel poverty last year. 

The Coalition also urges ministers to adopt a fairer way of defining fuel poverty and move away from a measure that focuses largely on property energy efficiency and towards a new definition based on whether a household spends more than 10% of its income on energy.

As well as restoring support for disabled people, older households, and families with young children, campaigners have called for a permanent social energy tariff to be introduced. This would offer discounted energy unit rates for low-income households to help make bills more manageable.

The Coalition also criticises the current energy market for being unfair to those on prepayment meters or in all-electric homes, calling for fairer pricing, stronger consumer protections, and more transparency. 

Finally, the response stresses the importance of accessible, community-led energy advice, calls on energy firms to improve customer service and support systems for vulnerable people and urges the government to empower local authorities and health services with funding to support fuel-poor households effectively. 

Simon Francis, Coordinator of the End Fuel Poverty Coalition, commented: “Fuel poverty is not just a financial issue, but a national health crisis that needs a bold, urgent response from all corners of government.”

The full response is available to read here.

Pensions in jeopardy

Meanwhile, the National Pensioners Convention is calling on the government to halt plans that will allow employers to risk the pensions of millions by taking money out of Defined Benefit (DB) schemes.

The NPC, the UK’s largest campaign group run for and by older people, fears ministers may be preparing to proceed with proposals originally mooted by the previous Conservative government.

The Labour administration argues ‘surplus’ cash in the DB pension funds will unlock new investment in the economy.  But a survey by the Pension Insurance Corporation (PIC) reveals many of the 8.8 million people who still belong to DB pension funds – sometimes known as final salary schemes – worry the plans will jeopardise their incomes in later life. The poll found a staggering 94% of DB pension members said they do not want politicians interfering with their private and occupational pensions and fear the money will not be reinvested in the economy but used to pay shareholders.

Jan Shortt, NPC General Secretary, commented: “It is astonishing the government would risk the pensions of millions at a time when older people are already under increasing financial pressure in retirement.  This poses a double jeopardy when worldwide investment markets are so volatile.”

The NPC says that not everyone on DB schemes are on substantial pensions, with many of the oldest having seen their funds devalued by the rising cost of living. This month’s 4.1% state pension rise is already undermined, with millions of older people paying tax for the first time; millions more having lost their universal Winter Fuel Payments as energy prices continue to rocket; and countless disabled pensioners and their carers face losing the Personal Independence Payment.

Situation for pensioners worse than last year

The threat to pensions comes as  a new report from Age UK warns groups of pensioners are still struggling with the cost of living, with the situation worse than last year. Older disabled people, older renters and those living on low and modest incomes are most affected.

One in 3 (34%) – equivalent to 4.1 million pensioners – said they felt less financially secure heading into 2025 compared to when 2024 began, according to the research.

The situation is worse than last year for all pensioners, particularly older people with a disability, older renters and those on low-to-modest incomes. Other struggling groups include older women, people living alone and older carers.

The Charity’s new report highlights its concerns about the impact on older people of energy costs that just keep rising and the struggles older people face affording the basics, especially after the loss of the Winter Fuel Payment for many on low and modest incomes, including those with health conditions.

Despite the ongoing financial pressures, Age UK’s research also found that three in five (59%) pensioners who have cut back on heating or powering their home – equivalent to 2.9 million – would rather turn off their heating than get into debt – rising to 65% for women pensioners.

Image: https://pix4free.org/photo/3028/cost-of-living.html Cost of living by Nick Youngson CC BY-SA 3.0 Pix4free