Understanding the Default Tariff

If you’re paying more for your energy than you’d like, there’s a good chance you’re on a default tariff – and you may not even realise it. The default tariff, also known as the standard variable rate (SVR), is the price your energy supplier charges when you’re not on a fixed-rate deal. It’s the tariff that automatically applies when your previous fixed contract ends, unless you actively switch or renegotiate.

Ofgem, the UK’s energy regulator, sets the maximum price cap for default tariffs every three months. However, this doesn’t mean you’re getting a good deal. In fact, being on the default tariff often means you’re paying significantly more than customers who’ve actively chosen a fixed-rate agreement.

Who is on the Default Tariff?

Millions of UK households are on default tariffs, though many don’t realise it. You’re likely on one if:

• Your fixed-rate deal has ended and you haven’t switched suppliers
• You’ve never actively chosen an energy tariff
• You’ve been with the same supplier for many years without switching
• You receive letters from your supplier saying your contract has ended

Recent data suggests around 40% of UK households remain on default tariffs. This includes vulnerable customers who struggle with switching, older people who prefer not to change suppliers, and those who simply don’t realise they can get a better deal elsewhere.

If you’re currently renting, you might also be on a default tariff if your landlord arranged the energy supply. Similarly, if you’ve recently moved house and accepted the existing supplier’s offer without shopping around, you could be paying over the odds.

Why Default Tariffs Cost More

The default tariff is expensive because suppliers have little incentive to offer competitive rates to customers who aren’t actively looking elsewhere. It’s essentially a captive market – people who stay put end up subsidising those who switch regularly.

Whilst the Ofgem price cap does limit how much suppliers can charge on default tariffs, it’s still considerably higher than what you’d pay on a competitive fixed-rate deal. The gap between the price cap and competitive fixed rates can be hundreds of pounds per year.

In recent years, this difference has become more pronounced. During periods of energy price volatility, suppliers have increased default tariff rates quickly, whilst fixed-rate deals for switchers have remained more stable. This means loyal customers – paradoxically – pay the most.

How to Check if You’re on a Default Tariff

Determining whether you’re on a default tariff is straightforward. Check your latest energy bill – it should clearly state your tariff name. Default tariffs are usually called things like ‘Standard Variable Rate’, ‘Default Tariff’, or simply your supplier’s name followed by ‘Variable’.

If you’re unsure, log into your supplier’s online account or give them a ring. Ask specifically if you’re on a default tariff and when your contract ends. Make a note of the end date – this is when you should take action to avoid automatic renewal.

You can also use comparison websites to see what deals are available and compare them with your current rate. If there’s a significant gap – typically £200 or more per year – you’re definitely overpaying.

The Cost of Staying Put

Remaining on a default tariff costs the average household considerably more than switching to a competitive fixed-rate deal. During times when the price cap is low, the difference might be £100-200 per year. When energy prices spike and the price cap increases, the gap can widen to £400-600 or more annually.

Over several years, staying on a default tariff could cost you thousands of pounds. This is particularly painful if you’re a pensioner or struggling with energy costs, yet ironically, many vulnerable customers remain on expensive default tariffs because they’re uncertain about switching.

The good news? Switching is free, simple, and takes just ten minutes. You’ll need your postcode, bill details, and current meter readings, but that’s it.

How to Escape Your Default Tariff

Getting off your default tariff involves either switching suppliers or negotiating a better rate with your current provider. Here’s how:

Switch Suppliers: Use a comparison website like MoneySuperMarket, Confused.com, or uSwitch to find the best deals available to you. Filter by cheapest price and read the reviews. Once you’ve found a deal you like, the new supplier handles everything – you don’t need to contact your old supplier. The switch typically takes 3-4 weeks.

Negotiate with Your Current Supplier: Before you switch, ring your supplier’s retention team and ask what fixed-rate deals they can offer. Sometimes they’ll match competitors’ prices to keep you. It’s worth trying, especially if you value the convenience of staying put.

Track Your End Date: Set a calendar reminder three weeks before your contract ends. This gives you time to find a new deal and arrange the switch before you’re automatically moved to a default tariff.

Special Protections for Vulnerable Customers

Ofgem recognises that some customers struggle with switching and energy costs. If you’re over 60, disabled, or have a serious health condition, you may qualify for additional protections or support schemes. Some suppliers offer loyalty bonuses for vulnerable customers, and energy charities can provide free advice about the best deals for your circumstances.

If you’re vulnerable and struggling, contact your supplier or visit the Citizens Advice Consumer Service for free, impartial advice.

Make Your Move Today

If you’re on a default tariff, you’re almost certainly overpaying. The process of switching is straightforward, free, and could save you hundreds of pounds annually. Even if you’ve never switched before, now is the time to take action. Visit a comparison website today, check what deals are available to you, and don’t accept the default tariff’s high prices as inevitable. Your wallet will thank you.