Paying your bill a year upfront – is it worth it?

paying upfront

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Two energy companies are now offering a deal where you pay the whole year in one go, is paying upfront worth it?

Eversmart Energy and Toto Energy claim their year saver deals are the cheapest on the market.

But are these deals all they’re shaped up to be? We take a look at the details.

How does it work?

Similar to options available for car insurance or broadband, you pay your year’s energy bill upfront. For a three-four bed house with working people living there, the household bill would come to around £973 a year.

This acts like a (massive) credit balance. Eversmart Energy give you 1% interest per month on that balance – Toto Energy do not.

However, this isn’t a done-deal one-off payment. If you end up using more energy than you expected, then you will need to pay any additional costs per month. Both companies call this ‘topping up’.

Eversmart has a £50 exit fee, with Toto Energy you can leave at any time. 

Is it really the cheapest?

The saving you’d make isn’t really that much more than normal monthly deals.

At the time of writing, there are monthly deals which work out at a similar price or even cheaper. We can switch you to these deals year on year after one quick sign up.

What’s the catch?

Firstly, clearly not everyone is in a position to pay this much upfront. Especially when a costly Christmas is just on the horizon.

It also doesn’t fit neatly with other regular incomes and out-goings. Most people earn a monthly wage after all and pay more or less a similar amount for things like rent, food, housekeeping and travel costs.

This is why we do not switch our Look After My Bills members to this tariff.

Is it a risk?

Paying for all your bill in this way doesn’t come without its risks.

As the lessons of this year has taught us, price should not be the only factor which decides who you go with for your gas and electricity.

Consumer charity Citizens Advice has voiced concerns about this kind of tariff given the current energy climate. Another energy supplier went bust this week (read all about what to do if your energy supplier goes bust).

Gillian Guy, chief executive of Citizens Advice, said: “If similar products and practices become more widespread, there may be serious implications for Ofgem’s safety net.”

“It was not designed to cover the failure of firms where customers may have credit balances running into thousands of pounds.”

What is Ofgem’s safety net?

This is a new change in regulation which Ofgem, the energy regulator, brought in last month. This means that when an energy supplier goes out of business, Ofgem makes sure their customers credit balances are protected.

Ofgem’s safety net measure requires all suppliers to help pay for the overhanging credit balances. This most likely ends up being absorbed by people’s bills.

This in mind, the implications of these kind of tariffs on other suppliers in the market has raised concerns

Confused by the options?

If you would rather see how our service Look After My Bills can do this all for you then have a read of our guide on auto-switching or sign up directly on our homepage.