Is it worth paying exit fees to switch suppliers?
Can you imagine that your household spends around the same amount on your monthly utility bills as it does on clothing and footwear? An analysis of data from Gov.uk carried out by Nimbefins showed that in 2019, the average uk household spent around £115 per month on energy – a figure that represents close to 5% of the total household budget.
Energy tariffs are getting undoubtedly more expensive every year in spite of government efforts to minimise them. Surprisingly however, it is customer apathy that is the biggest reason behind overpaying, since around 60% of households have never switched suppliers and continue to remain on expensive standard variable tariffs for household energy.
Switching energy suppliers is a relatively painless process thanks to the proliferation of comparison and switching services. It is surprising then, that not more households are hesitant to switch suppliers to get a better deal. One of the most common reasons cited for this is because you have to pay an exit fee when switching suppliers.
What is an exit fee?
When ending a fixed term contract, you will most likely have to pay a small penalty for ending your relationship. This is known as an exit fee. By paying this, you and your supplier are making the mutual decision to end your contract, so that you can switch to a new energy supplier.
Read this helpful guide to understand exit fees and how to switch suppliers to help you get the best deal on your household energy.
Do you have to pay an exit fee?
In most cases, if you are cutting short a fixed-term contract, you will have to pay an exit fee. If you are on a standard variable tariff, though overall more expensive, you will not be charged an exit fee for switching to a new supplier.
Most suppliers typically notify you 6-7 weeks before the end of your contract to ask whether you would like to extend your service, or switch to another supplier. Following this, you are free to switch suppliers without incurring an exit fee. However, if you switch anytime outside the window of this period, then you will have to pay up.
Another scenario in which you may not need to pay any exit fees, is if you are moving to a new house and plan to retain the same supplier and tariff. If you are planning to switch, check if your current supplier allows you to change your tariff without paying exit fees. You might be able to get a better deal on your energy without having to go to the hassle of switching suppliers and paying exit fees.
Here is a simple table that helps determine whether you need to pay any exit fees (in the majority of cases). It is best to check with your current energy supplier before cancelling your contract to check whether you are liable for any exit fees.
|You need to pay an exit fee if:||You don’t need to pay an exit fee if:|
What documents do you need to switch energy suppliers?
In order to switch energy suppliers you will need the following information:
- Your postcode
- Current supplier
- Name of tariff you are on
- How much you pay in KwH per month
- Your bank details
You can find this information on your energy bill or ask your current supplier for it.
How can you switch suppliers?
In a bid to make it easier for customers to switch between energy suppliers, many suppliers offer an “Energy Switch Guarantee”. This ensures that your switch to the new supplier will be as smooth and hassle-free as possible, and that any inadvertent charges during the switching process will be paid for by the supplier. You should always keep an eye out for whether your new supplier offers this guarantee to ensure that you are receiving the best service while switching.
To switch suppliers you can:
- Phone your current energy supplier or check their website to find out what deals they have
- Use one of the accredited price comparison websites to find deals from other suppliers in your location
- Switch suppliers at events in shopping centres and supermarkets
Your new supplier will contact the old supplier to ensure there are no outstanding payments due and will get in touch with you once your contract starts. The switching process can take any amount of time between a few days to around 3 weeks from start to finish, so it is best to initiate the process of switching well before your current contract ends.
Exit Fees for Big Six Suppliers
To give you an idea of the actual cost of exit fees, here are the various fees charged by the biggest six energy providers in the UK.
|Company||Gas exit fee||Electricity exit fee|
How to avoid paying exit fees
Lately, certain energy suppliers, especially the smaller ones, have tariffs and plans on offer that have zero exit fees, so it is a good idea to keep an eye out for them – switching without paying exit fees is easier on you as a customer.
Additionally, you can always switch to a better tariff from your current supplier – most suppliers don’t charge you exit fees for simply changing your plan.
However – it is important not to lose sight of the fact that even if you do end up paying an exit fee, it is only a one-time charge. Instead, you should calculate whether the cost of paying the exit fee is lower than the potential savings you could make from switching to a new supplier; this is what really matters. In a scenario like this, you might consider paying the exit fee anyway and switching to a new supplier, if your savings are going to be significant in the long run.