The Winter Fuel Payment (WFP) is an annual cash transfer paid to all UK individuals who are above the female state pension age. I exploit if the label of this transfer can increase households’ fuel spending and, consequently, whether it enhances well-being and home’s temperature. Using data from the UK Household Longitudinal Survey (2009–2017) and implementing a Multi-Cutoff Regression Discontinuity Design with a normalizing and pooling approach, I find that (a) WFP-eligible households increase their annual fuel spending by 6.40 per cent on average, compared to the ineligible group, with the strongest effects observed among unhealthy recipients, (b) among unhealthy recipients, the WFP not only prompts increased spending on fuel but also leads to significant improvements in self-reported health, (c) by linking UKHLS data to outside temperature data, the labeling effect is more pronounced during milder winter conditions, when heating is more discretionary, as indicated by significant increases in home temperature, and (d) the labeling effect is also stronger for individuals not receiving benefits, who have to apply for the payment, reinforcing the importance of the label’s salience.
These findings highlight the role of mental accounting, as households do not respect the fungibility of cash, instead aligning their spending with the labeled purpose of the transfer. Additionally, the label appears to provide implicit health advice, by nudging recipients to prioritize heating spending, which is particularly relevant for poor health individuals.