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Following a family mystery to Iceland’s remotest village

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The table top of a mountain gives way to a sheer cliff dropping hundreds of metres to the ocean below

No one knew what became of Grandpa’s two woollen jumpers. They were last seen in the 1970s: it was rumoured they were thrown away by my grandmother, or possibly eaten by moths.

Grandpa, for the most part, wanted to forget the war. He didn’t much want to talk about the Normandy landings, but he did keep these two souvenirs from his service elsewhere. They were heavy and oily garments, with intricate patterns that suggested days of needlework through sunless winters. Family folklore had it that they were knitted by Grandpa’s girlfriend, who he met while serving at an Arctic navy base that was forever buried under snow drifts. Thirty years after the jumpers vanished, Grandpa passed away. Where they had come from, who had knitted them — these things remained a mystery.

A single clue remained: my school project on Grandpa’s second world war experiences contained the name of a base: “Sibol.” This, research revealed, was really “Saebol” — a tiny village on the Hornstrandir peninsula, perched at the remote northwestern edge of Iceland (also the northwesternmost point of Europe). Here the Royal Navy had built a radar station on the precipice of a 500-metre high cliff, perched like an eyrie over the North Atlantic breakers. Two miles away was the village where they could buy fresh sea trout (and perhaps have the company of Icelanders).

After the war, the base fell into ruin: later the village and then the whole peninsula were abandoned, for their remoteness made them unviable. Hornstrandir is now a nature reserve without permanent human habitation — guidebooks call it “Europe’s last wilderness” or a land at “the end-of-the-world”.

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The table top of a mountain gives way to a sheer cliff dropping hundreds of metres to the ocean below
The cliffs of Hornstrandir. The radar base is on the precipice, concealed by cloud; Saebol church is just visible to the right of the ridge © Toby Smith
A group of men sit on military equipment posing for a photograph taken in black and white in an ice-bound landscape
Oliver Smith’s grandfather, left, taking a break with the other soldiers while hauling supplies to the radar base in Saebol during the second world war

Through the summer of 2024 I scanned the few existing images of the base and studied the pixels that attested to its presence on Google Earth. Then, one stormy week in August, I caught a flight to north-west Iceland, boarded a little ferry at Ísafjörður and finally saw Hornstrandir with my own eyes through a spray-soaked porthole: a grey silhouette rising from heavy seas. There are no harbours here so, after a 40-minute crossing, we transferred from the ferry to an inflatable launch and landed with a crunch on the black sand beach. The weather was worsening: tomorrow the ferry would not sail, the captain had warned. I was stuck on Hornstrandir, left to solve the mystery of the two woollen jumpers.


Map showing the village of Saebol in Iceland, as well as the Hornstrandir Nature Reserve and other key locations nearby

The Hornstrandir peninsula is part of the Westfjords — a mountainous part of Iceland that covers an area larger than Slovenia, but which has a population of just 7,000. The Westfjords’ first recorded visitor was the Norseman, Flóki Vilgerðarson, in the 9th century. He had sailed from the Faroes with three ravens. When released out at sea, the birds would fly high to scan the horizon — the boat would then follow the path of a raven who had spied dry land. Days later, Flóki looked out over a fjord full of icebergs and gave the country the name it still has today.

The Westfjords get a fraction of the tourists who tour Iceland’s Golden Circle and the south, in part because of the effort of getting here. The largest settlement, Ísafjörður, is 140 miles as the crow flies from Reykjavik, but a driver must cover double the distance, the roads tortuously looping up and down a succession of fjords, like a pencil tracing the fingers of an outstretched hand. The reward is seeing Iceland as it was before the tourist explosion of the 2010s: before its vast landscapes became stage scenery for Hollywood films and influencer selfies. There are quiet fishing villages, the great waterfalls at Dynjandi, fewer crowds.

Two men stand in front of a steep, wide waterfall and a pool and rapids at the bottom of it
Oliver and his cousin at Dynjandi waterfalls on the ‘mainland’ of the Westfjords © Toby Smith
A mist-covered mountainside in with a thin stream running down one of its crevices
A view down to the sea from Bolafjall, close to Ísafjörður © Toby Smith

The outlier is the Hornstrandir peninsula itself — where the northernmost finger of the Westfjords comes within three miles of touching the Arctic Circle. Hornstrandir is cut off from the rest of the Westfjords by a glacier on its neck, meaning there are no roads to drive, scant reception to make social media posts.

Here, instead, you get an impression of the country as it was centuries ago — when the only way to travel was on foot, horseback or under sail. In Hornstrandir’s most remote parts, you see Iceland as it might have appeared to the black eyes of Flóki’s ravens: a virgin landmass newer than the New World, for this land had never before known human footfalls.

Only a lighthouse guarded the shore as the boat left me, my cousin Toby Smith (also on the trail of his Grandpa) and our guide Doug Robinson on the beach at Slétta. Sea sickness eased as we climbed the brittle volcanic rock. Greylag geese flew overhead. It would be a nine-mile hike to Saebol, where we intended to camp for two days as we explored the peninsula. Beyond the lighthouse, the only marks of humanity were telegraph poles erected by the British during the war, standing like the Narnia lamppost out in the tundra.

A boat moored in a mist-covered harbour with a backdrop of steep cliffs
Sif, a former Norwegian ambulance ship, that serves as a ferry to Hornstrandir © Toby Smith
A stark green and brown landscape of hills without trees, with a small stream winding through flatlands towards a small lake
‘The appeal of hiking here is roaming a uniquely raw wilderness — one largely without paths and without shelter from the elements’

From the deck of an approaching ferry, Hornstrandir can seem lifeless and lunar: grey cliffs, becoming rusty red on their vertical flanks. Close up, you see it is a place where life clings on tightly, in defiance of winds that rage up to 100mph. Puffball mushrooms sprout in the lee of boulders. Bonsai birch trees grow sideways, hugging the ground.

“There’s an old joke,” said Doug. “If ever you find yourself lost in an Icelandic forest: stand up.”

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Hornstrandir turns out to be rich foraging territory — we pick sour blueberries from soft beds of moss. Elsewhere are small patches of rhubarb — vestiges of gardens from houses that no longer exist. The appeal of hiking here is roaming a uniquely raw wilderness — one largely without paths and without shelter from the elements. At one point we are forced to cross a river that has burst its banks, the icy water sloshing up to our kneecaps. Another time, a vengeful gust rips the waterproof cover from Doug’s rucksack, and carries it over a cliff edge: we watch helplessly as it spirals high over the sea.

Most tourists come to Hornstrandir to see Iceland’s only native land mammal — the Arctic fox — little grey creatures for which this is a precious stronghold. Later, one scampered along a beach in front of us, a fish tail hanging from its mouth. But more often our conversation centred on another animal.

A few houses near to a shoreline surrounded by steep cliffs
Some of the houses that comprise Saebol today; the village was abandoned in 1952 but some people have returned to live there in summer © Toby Smith

Polar bears are not native to Iceland, but they do inhabit the coast of Greenland, 180 miles across the Denmark Strait. It sometimes happened that a bear was chased out of its territory on to unfamiliar pack ice. Come summer, the ice could splinter: an unlucky bear might find itself cast adrift, sailing on a frozen raft under the midnight sun. After days at sea, the currents brought many to Hornstrandir.

I found records of over 130 bears making landfall in the Westfjords — the first in 1321, the most recent in 2011, with three locals killed by the animals in between. The protocol is for a coastguard helicopter to be dispatched with a marksman — but mostly it is a case of false alarms. Nervous hikers have reported seals or boulders. Doug recalled panic two years ago over footprints made by a swan. Hornstrandir was a place of mirages — even so, it was worth being cautious. “By now,” he said, “we are overdue for a polar bear.”

Three weeks after we returned, a young polar bear was shot across the bay from Slétta.

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Grandpa also arrived by sea, albeit via Reykjavik. His wartime posting in Hornstrandir was not one of glory or heroism. But it is the first record I have of anyone in my family or my ancestors leaving Great Britain. Here, he would have seen unfamiliar sights: the nightly dance of the aurora, the leaping humpbacks in the fjords, a poor population who still gathered seabird eggs from springtime cliffs, suspended on fraying rope.

This remote base offered sanctuary from the horrors of the battlefield — a serviceman could stand on a cliff at the westernmost edge of Europe with the polar wind in his face, and all the turmoil of a continent at war behind his back. No German bomber would reach him here. More significantly, Grandpa was also witnessing the last days of permanent habitation on Hornstrandir.

The stone ruins of a former military base in a stark landscape
The remains of the Saebol base (aka Admiralty Experimental Base 7) © Toby Smith
Ice on the Saebol radar installation during the second world war
The crew at the lower part of the base; Oliver Smith’s grandfather is third from left, top row

For some hours we followed the so-called “green cliffs” of Hornstrandir — great precipices that curved upward like cutlasses, and then fell into air and writhing seas. Eventually the clouds thinned to reveal buildings to the north: a red-roofed church and a handful of houses dotted along a bay. This was what remained of Saebol. Surprisingly, its houses were not ruined — drawing closer we saw one building that looked brand new. Its owner was a tall pensioner with rain-splattered spectacles, and a pipe hanging from the corner of his mouth. Einar Hreinsson had made it his mission to revive Saebol as a living village, albeit only for the summer months.

 “This is the most precious place on the planet,” he told me. “That is why our family had to return.”

Einar welcomed us into his home, built during the pandemic, where he and his wife Anna are resident from May to late August. Over a lunch of smoked trout and hot chocolate served in Moomin mugs, he told us the story of the village. For centuries, Saebol lived off the Atlantic. In a good week villagers could net a dozen tonnes of cod. In a bad year they could lose 12 men to the ocean. By the 1940s, people had battery-powered radios: they knew of the “madness” that had gripped Germany. They were afraid the day that warships appeared in the bay.

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Einar and Anna Hreinsson’s house at Saebol. The couple live in the village from May to late August © Toby Smith
Three people sit in a room chatting
Oliver Smith chats with the Hreinssons. Einar has made it his mission to revive Saebol as a living village © Toby Smith
A table set for lunch with chees, eggs bread, biscuits and a teapot and cups
Lunch, with Moomin mugs, at the Hreinssons’ house © Toby Smith

When it was, in fact, British servicemen who stepped ashore, Einar’s grandfather and great uncle presented themselves as the village’s only English speakers. They were glad to find employment with the Royal Navy: helping my Grandpa and two-dozen comrades heave strange equipment to that wind-blasted clifftop (a location they privately considered “crazy”). Rumours circulated about what the radar was looking for. Einar leaned in to me and — as if spies were listening — whispered the word: “Bismarck.”

The servicemen and the locals got on famously. Local children saw moving pictures for the first time as film reels whirred in the mess: they also tasted solid chocolate. Grown-ups became hooked on gifted cigarettes and were invited to the base, where they were waited on like “kings and queens”. This desolate Arctic posting turned out to be a blessed one: Einar’s grandmother remembered the servicemen “cried when they arrived, and cried when they left”.

But by the time the war was over, Saebol had had a glimpse of the modern world. Soon after, the local doctor departed, and towns on the “mainland” offered work on modern fishing boats. The migration happened rapidly: Hornstrandir was abandoned between 1948 and 1952: furniture piled into boats, horses and family dogs slaughtered, houses left to decay. The day she left, Einar’s grandmother hysterically threw her possessions on to a bonfire by the shore. On the “mainland” she never recovered from the pain of that departure from Hornstrandir. “I wish she could see that we are back here now,” said Einar.

A dolls’ house sits in the corner of a room
A dolls’ house saved from the original village © Toby Smith
Villagers at Saebol, prior to the abandonment of the peninsula in 1952
A black and white photo of a dolls’ house on a table
The same dolls’ house, photographed in the village in the 1940s

Storms were forecast so Einar insisted we forgo our tents, and stay at his house instead. He also showed us around his village, unlocking the old schoolhouse where ancient desks were carved with initials. We visited the church whose chandeliers swayed in the shadows as the bell tower shook in the wind. We also met other families who had returned to their ancestral land to build new summer homes: who now had the financial means to revive a settlement that had existed since the time of the longships and the three ravens.

We knocked on the door of five houses: met about 20 people, some of whom were staying here for the summer, others holidaying for a weekend. But no one had heard of the girlfriend, nor knew who had knitted the two jumpers. September was coming: people would soon be leaving. Plywood was being affixed to windows before the snows came.

“We will keep investigations ongoing,” said Einar, the day we left. But he knew, as we did, that our questions had come two decades too late.

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From Saebol, a path led up a steep incline and on to the mountain plateau. Sleet began to fall as we made our way to the radar base, becoming snow on the higher ground. The village houses were far away when a Nissen hut appeared from the fog. No scavengers had been to Admiralty Experimental Station Seven, nor had any plants overrun it. There was still coal in the bunkers, and on a diesel engine you could read “DURSLEY” — the Cotswold market town where it was made.

Rather it was the Arctic weather that had prized the base apart: storms that had smashed its glass, turned brickwork to rubble. Just a few paces from the huts was the cliff edge, dropping into mist. Breaking waves sounded from 500 metres below. One serviceman had described this hazard in his diary. You could sense vertigo in the wobbly way he had written the word — “sheer”.

Now, at a time when the world seemed to stand on another precipice — when another “madness” seemed to be taking hold — I wondered if these remote heights might ever again present themselves as a hideaway, a safe retreat. I thought too, of Grandpa, wearing his jumpers. Though we would never find out who knitted them, we would later find black and white images of him at the base: smiling among the snowdrifts, a pipe hanging out of his mouth.

I was glad I had followed in his footsteps, I thought, as I went to inspect the wreckage of the radar itself. From this lonely latitude, for months on end, the operators sent wave upon wave of invisible light out across the wide expanse of the ocean. Then they would wait for their instruments to register something — those returning echoes which indicated a presence, out of sight.

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Details: how to visit Hornstrandir

Guide Doug Robinson (left) and Oliver Smith enjoying soup after the hike, at the Old Doctor’s House in Hesteyri © Toby Smith

Hornstrandir is the most remote part of the Icelandic coastline — conditions can be extreme and help distant, so hiking is only generally undertaken between June and August. Travel here can be akin to an expedition; it’s wise for all but the most experienced hikers to go with a guide.

Borea Adventures (boreaadventures.com) operates as a one-stop shop for Hornstrandir trips — as well as operating the ferry from Ísafjörður, they offer guided walks in the interior, with a three-day traverse of Hornstrandir from £938 per person.

Most visitors to Hornstrandir will need to camp at the free campsites. Borea is also able to organise stays at Kvíar Lodge — an off-grid farmhouse on the southern side of the peninsula that’s renowned for Arctic fox watching opportunities (and can be visited during winter too).

Ísafjörður, the staging post for Hornstrandir adventures, can be reached by either a six-hour drive from Keflavík International Airport, or a 45-minute flight from Reykjavik airport with Icelandair — get a window seat as the landing is a spectacular one (icelandair.com). Stay at the Hotel Ísafjörður overlooking the bay, with rooms from £120 (isafjordurhotels.is).

Oliver Smith was a guest of the tourist board, Visit Westfjords (westfjords.is).

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For more on this chapter of history, see Jökull Gíslason’s book Iceland in World War II — A Blessed War (Sæmundur).

Find out about our latest stories first — follow FT Weekend on Instagram and X, and subscribe to our podcast Life & Art wherever you listen

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Major cinema chain to shut two sites for good TODAY as ‘gutted’ locals sob for their loss

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Major cinema chain to shut two sites for good TODAY as 'gutted' locals sob for their loss

TWO major cinema sites will close for good today as “gutted” locals sob for their loss.

As part of a Restructuring Plan, Cineworld is eliminating at least six popular sites in the UK.

The news has come as a shock to hundreds of locals

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The news has come as a shock to hundreds of locals
The closures are all part of a Restructuring Plan to boost profit

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The closures are all part of a Restructuring Plan to boost profit

In July, the cinema giant announced the Restructuring Plan was to “return our business to profitability”, “attract further investment” and “ensure a sustainable long-term future for Cineworld in the UK”.

Although local residents may argue otherwise.

Sites such as Glasgow Parkhead, Bedford, Hinckley, Loughborough, Yate and Swindon Circus all featured on the elimination list.

As of October 6, we saw the back of the Cineworld’s in Swindon Circus, Bedford, and Glasgow Parkhead.

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But today, Cineworld’s in both Loughborough and Yate will too, take a bow.

A spokesperson for Cineworld Yate said: “After years of providing movie-lovers with a place to feel more, we have made the difficult decision to close Cineworld Yate.

“The cinema will remain open until October 13.

“We hope you continue to enjoy watching movies at our local cinemas of Swindon Shaw Ridge.”

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Hundreds of locals shared their thoughts in the comment section.

One person wrote: “Totally Gutted.

MASS CINEMA CLOSURES: Cineworld

“We need a going away party. I’ll provide the entertainment. Let’s do it, we will miss you guys and our own cinema.

“I’ll never go to the movies again.”

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While a second person wrote: “I’m genuinely gutted about this.

“I was recently diagnosed autistic and I’ve found this cinema to be one of the most pleasant, calm and welcoming environments for someone like me who struggles with sensory overstimulation.”

A third person said: “It was a lifeline for some people.

“They don’t realise how devastating this is for some people.”

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And a fourth said: “Can’t believe it’s the end! Some great memories of working here and met lots of great people! Sad to see it go!”

Meanwhile, the same statement was released about the Loughborough Cineworld.

Customers were advised to visit local cinemas in Burton upon Trent, Nottingham, and Hinckley.

Even though Hinckley is to be eliminated.

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Again, dozens of locals took to the comment section to share their thoughts.

One said: “Really sad news about Cineworld Loughborough.

“One of the selection I have visited and enjoyed with my Unlimited card.

“Sending all my best wishes to everybody affected by the closure.”

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While a second wrote: “Such a shame, the best cinema we’ve ever been to for the wheelchair access, customer service and viewing experience.

“Love to all the staff who have always gone above and beyond.”

 And a third said: “This is so sad, this is my favourite cinema.”

Although six Cineworld sites made the elimination list, the chain is said to be renegotiating rent agreements for around 50 of its sites.

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Struggling businesses might take this route to lower operating costs.

But the landlords don’t need to accept the conditions.

Meaning all 50 additional Cineworld complexes could also be at risk of closure if the chain and its landlords cannot reach an agreement.

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Three tools that reveal if you could qualify for benefit worth £3,900 that unlocks winter fuel payment

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Three tools that reveal if you could qualify for benefit worth £3,900 that unlocks winter fuel payment

THREE helpful tools could reveal whether you qualify for a benefit that unlocks the winter fuel payment.

Pension Credit is worth on average £3,900 a year and comes with a host of additional perks including a free TV licence for over 74s.

Pension Credit is worth on average £3,900 a year

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Pension Credit is worth on average £3,900 a yearCredit: Getty

The Government benefit also opens up the winter fuel payment which is worth up to £300 this year.

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Around 800,000 eligible for Pension Credit are yet to claim it, with The Sun launching a campaign to improve uptake.

Luckily though, there is one quick way you can find out whether you might qualify for Government benefits, including Pension Credit.

Three organisations have free-to-use calculators that reveal what benefits you might be eligible for.

They also tell you how much you might get, how payments could be affected based on earnings or an increase in working hours and how your benefits might be impacted if you experience a change in circumstances.

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The three main online calculators you can use are:

You can also access Turn2Us’ calculator via The Sun’s website.

What information you will need ready

To help the calculators accurately estimate what benefits you might be entitled to, you will need certain information ready beforehand.

The Government’s website says you’ll need accurate information about your:

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Three key benefits that YOU could be missing out on, and one even gives you a free TV Licence
  • savings
  • income, including your partner’s (from payslips, for example)
  • existing benefits and pensions (including anyone living with you)
  • outgoings (such as rent, mortgage, childcare payments)
  • Council Tax bill

You should be able to find information about your savings by logging into online banking via your computer or smartphone.

Bear in mind, you can’t use the above three calculators if you are a prisoner, student or non-British or Irish citizen.

You also cannot use them if you are on strike, live outside the UK or living permanently in a residential care or nursing home.

What is Pension Credit and who is eligible?

Pension Credit is a government benefit designed to top up your weekly income if you are a state pensioner with low earnings.

The current state pension age is 66.

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There are two parts to the benefit – Guarantee Credit and Savings Credit.

Guarantee Credit tops up your weekly income to £218.15 if you are single or your joint weekly income to £332.95 if you have a partner.

Savings Credit is extra money you get if you have some savings or your income is above the basic full state pension amount – £169.50.

Savings Credit is only available to people who reached state pension age before April 6, 2016.

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Usually, you only qualify for Pension Credit if your income is below the £218.15 or £332.95 thresholds.

However, you can sometimes be eligible for Savings Credit or Guarantee Credit depending on your circumstances.

For example, if you are suffering from a severe disability and claiming Attendance Allowance, as well as other benefits, you can get an extra £81.50 a week.

Meanwhile, you can get either £66.29 a week or £76.79 a week for each child you’re responsible and caring for.

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The rules behind who qualifies for Pension Credit can be complicated, so the best thing to do is just check.

You can do this by calling the Pension Service helpline on 0800 99 1234 from 8am to 5pm Monday to Friday or by using free online calculators.

Those in Northern Ireland have to call the Pension Centre on 0808 100 6165 from 9am to 4pm Monday to Friday.

It might be worth a visit to your local Citizens Advice branch too – its staff should be able to offer you help for free.

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Pension Credit is known as a “gateway” benefit which means it opens up a host of perks, like the winter fuel payment and a free TV licence if you are 75 or older.

It also unlocks discounts on your council tax and the Warm Home Discount, if you are on the Guarantee Credit part of the benefit.

What is the Winter Fuel Payment?

Consumer reporter Sam Walker explains all you need to know about the payment.

The Winter Fuel Payment is an annual tax-free benefit designed to help cover the cost of heating through the colder months.

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Most who are eligible receive the payment automatically.

Those who qualify are usually told via a letter sent in October or November each year.

If you do meet the criteria but don’t automatically get the Winter Fuel Payment, you will have to apply on the government’s website.

You’ll qualify for a Winter Fuel Payment this winter if:

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  • you were born on or before September 23, 1958
  • you lived in the UK for at least one day during the week of September 16 to 22, 2024, known as the “qualifying week”
  • you receive Pension Credit, Universal Credit, ESA, JSA, Income Support, Child Tax Credit or Working Tax Credit

If you did not live in the UK during the qualifying week, you might still get the payment if both the following apply:

  • you live in Switzerland or a EEA country
  • you have a “genuine and sufficient” link with the UK social security system, such as having lived or worked in the UK and having a family in the UK

But there are exclusions – you can’t get the payment if you live in Cyprus, France, Gibraltar, Greece, Malta, Portugal or Spain.

This is because the average winter temperature is higher than the warmest region of the UK.

You will also not qualify if you:

  • are in hospital getting free treatment for more than a year
  • need permission to enter the UK and your granted leave states that you can not claim public funds
  • were in prison for the whole “qualifying week”
  • lived in a care home for the whole time between 26 June to 24 September 2023, and got Pension Credit, Income Support, income-based Jobseeker’s Allowance or income-related Employment and Support Allowance

Payments are usually made between November and December, with some made up until the end of January the following year.

Do you have a money problem that needs sorting? Get in touch by emailing money-sm@news.co.uk.

Plus, you can join our Sun Money Chats and Tips Facebook group to share your tips and stories

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Rachel Reeves’s Budget must rescue Britain from its growth trap

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Line chart of Increase in UK potential GDP per worker (10-year moving average of year-on-year growth, %) showing Growth in output per head is at almost unprecedentedly low levels

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In her Budget due on October 30, Rachel Reeves, the chancellor of the exchequer, has to achieve four tasks. First and most obviously, she has to give hope to her party and the country that better times are coming. Second, she has to deliver the prospect of improved public services. Third, she must achieve the latter without ignoring the constraints she is under — not just those created by Labour’s promises, but, more significantly, those created by the UK’s vulnerabilities. Fourth and most important, she must offer a credible story on growth. Without that, little will work.

The Green Budget 2024 from the Institute for Fiscal Studies does, as always, illuminate the issues. But the chapter on the economy by Benjamin Nabarro of Citi is especially striking. It notes that “UK economic activity is 36 per cent lower than it would be had it continued to grow in line with its 1997-2008 trend”. The UK’s peers have done badly, too, but not as badly as this: the shortfall in the Eurozone is only 31 per cent, despite its internal financial crisis; and in the US, the shortfall is 24 per cent. Worse, UK GDP is well below even its already poor 2014-19 trajectory. Worst of all, the latest 10-year average of growth in potential GDP per worker is zero, the lowest in one and a half centuries, apart from the short-term impact of the end of the first world war and Spanish flu.

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Line chart of Increase in UK potential GDP per worker (10-year moving average of year-on-year growth, %) showing Growth in output per head is at almost unprecedentedly low levels

Yes, there is the likelihood of short- to medium-term improvements, provided there are no more big negative shocks. In particular, inflation is coming under control and monetary policy is likely to loosen. But, in the long run, what the government can spend depends overwhelmingly on higher-trend growth. In a stagnant economy, spending more on something means spending less on something else. The politics of such zero-sum choices are horrible. This is a big part of why the last government became so unpopular.

Unfortunately, in trying to deal with the need to accelerate growth while meeting fiscal priorities, the chancellor also has to take account of immediate and structural vulnerabilities. Among the former are that ratios of public debt to GDP are close to 100 per cent and long-term interest rates on gilts are above 4 per cent. Salient among the latter are that the UK has a “twin deficit” problem: it runs fiscal and current account deficits. A larger fiscal deficit is likely to cause even bigger current account deficits and so require a greater net inflow of foreign savings. In sum, the confidence of foreigners matters.

Line chart of UK fiscal and current account balances, % of GDP showing The UK has a structural 'twin-deficit' problem

Confidence is unpredictable. It is not dependent on meeting particular magnitudes for deficits and debt. But it does depend on whether the government seems to have a credible plan and the country has stable politics. Here there are also some painful realities. In addition to being structurally dependent on an inflow of foreign savings, the UK does not possess a significant reserve currency: people do not have to hold sterling-denominated assets. Yet the ability to issue debt in one’s own currency is vital for the ability to manage shocks, as has been proved so frequently since 2007. Alas, the behaviour of British politicians over the past decade has not strengthened the UK’s reputation for good sense.

For these reasons and the more fundamental (and related) needs of long-term growth, the Budget has to be multidimensional. Any moves in the direction of more borrowing have to be set in the context of long-term plans for fiscal policy and economic growth. This will require tax reform and higher taxation. But, given the structural external deficits, higher investment will require higher savings, too. The obvious route will be via substantially higher contribution rates for pensions. If savings rates did rise, it would be much easier to fund higher domestic investment.

Bar chart of Investment & savings as a % of GDP, 2010-24 average showing The UK has a chronic shortage of savings for investment

Above all, given the UK’s low investment and savings rates and the risks created by higher fiscal and external deficits, the government needs to find ways to generate growth that do not rely mainly on higher investment. The obvious possibilities are radical relaxation of planning controls, well-considered deregulation and promotion of innovation. The latter is particularly important, given the dire performance on productivity. The Advanced Research and Invention Agency, promoted by Dominic Cummings, might help. The government also needs to be promoting risk-taking finance for innovation.

The UK has to escape from its low growth trap. Alas, structural weaknesses of the economy will make the escape hard. The test for Reeves is not how she manages the immediate pressures but whether she knows how to get the economy out of this trap. The UK’s future depends on it.

martin.wolf@ft.com

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The £10 Aldi Specialbuy that can make radiators more effective and slash energy bills this winter

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The £10 Aldi Specialbuy that can make radiators more effective and slash energy bills this winter

THE £10 Aldi Specialbuy that can make radiators more effective and slash energy bills this winter is here just in time to help you keep your home warm without breaking the bank.

With the colder months just around the corner, Aldi has launched a bargain buy that could help you stay toasty while cutting down your energy bills

Aldi's £10 Specialbuy, pictured above, could help slash your energy bills this winter

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Aldi’s £10 Specialbuy, pictured above, could help slash your energy bills this winter
The budget store device can make radiators more effective

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The budget store device can make radiators more effective

The Superfoil Radiator Reflector, which costs just £9.99, is designed to make your radiators more efficient by reducing heat loss and ensuring your home stays warmer for longer.

Available from October 13 in-store only, this nifty device is a must-have for those looking to save on their heating costs this winter.

HOW IT WORKS

The Superfoil Radiator Reflector is a heat-saving product that fits behind your radiators to reflect warmth back into your room, rather than letting it escape through the walls.

Aldi claims it can cut heat loss by an impressive 86 per cent, making it a savvy choice for households trying to stay warm without cranking up the thermostat.

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It’s also super easy to install. The reflector comes with built-in adhesive strips, so there’s no need for extra tools or complicated instructions.

Just cut it to fit your radiator, stick it on, and you’re good to go. The product can be used on up to three radiators, making it a budget-friendly solution for any home.

With energy bills soaring, the Superfoil Radiator Reflector offers a simple, low-cost way to boost your home’s efficiency.

By reducing the amount of heat lost through your walls, you’ll not only keep your home warmer but could also see a reduction in your energy bills over time.

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Aldi’s £9.99 buy is certainly a more affordable option compared to other home insulation methods.

Plus, it’s a one-time investment – no ongoing costs, no maintenance needed. Once it’s in place, you can sit back and enjoy a warmer home without any extra effort.

HOW IT COMPARES

While Aldi’s Superfoil Radiator Reflector is only £9.99, a quick search online shows some competitors charging far more.

For example, Screwfix sells Superfoil Insulation from starting at £19.00, while Amazon has options priced at £25.

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That said, you can still find other affordable alternatives – B&Q offers 5 metres for £14.95.

Although a trip to Aldi might land you with some other heat-saving goodies.

ALDI WINTER WARMERS

If you’re looking for more ways to stay warm this winter, Aldi has a range of winter essentials hitting stores soon.

For instance, the Ambiano Heated Throw, priced at £29.99, is another great buy to keep the chill at bay.

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The heated throw, available in Dark Grey, Light Grey, and Cream, features nine adjustable temperature levels and is machine washable once the cable is removed.

It costs just 4p an hour to run, making it an affordable and cosy option for those frosty evenings.

Aldi claims using the heated throw for a couple of hours a night would only cost around 56p a week – meaning you could keep warm for a whole year for under £30.

If you’re after more comfort, Aldi is also offering the Silentnight King Size Thermal Mattress Cover for just £11.99.

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This teddy fleece mattress topper adds an extra 3 tog of warmth, perfect for cold winter nights.

It’s machine washable and tumble dryer safe, so keeping it clean is a breeze.

The Superfoil Radiator Reflector, Ambiano Heated Throw, and Silentnight King Size Thermal Mattress Cover will all be available in Aldi stores from October 13.

As with all Aldi Specialbuys, these items are only available while stocks last, so it’s worth getting to your nearest store early to avoid disappointment.

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You can check where your nearest Aldi store is using their store finder tool on the Aldi website.

Whether you’re looking to improve your home’s insulation or simply snuggle up with a heated throw, Aldi’s range of budget-friendly products has you covered this winter.

If you’re keen to stay warm and save money, these bargains are well worth snapping up before they’re gone.

SAVE MONEY AT ALDI

Unlike other major grocers, Aldi does not have a rewards or point card system but that does not mean you cannot save on your shop. 

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Every week the store releases a list of special buys, which are unique bargain products you find online at Aldi and in-store. 

The store releases a fresh range of deals every Thursday and Sunday, so be sure to check regularly to see what’s new. 

Meanwhile, it seems Aldi is geared up with bargain home-finds.

The budget-supermarket announced its latest home fragrances to help interior lovers update scent-scapes for the winter.

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How to bag a bargain

SUN Savers Editor Lana Clements explains how to find a cut-price item and bag a bargain…

Sign up to loyalty schemes of the brands that you regularly shop with.

Big names regularly offer discounts or special lower prices for members, among other perks.

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Sales are when you can pick up a real steal.

Retailers usually have periodic promotions that tie into payday at the end of the month or Bank Holiday weekends, so keep a lookout and shop when these deals are on.

Sign up to mailing lists and you’ll also be first to know of special offers. It can be worth following retailers on social media too.

When buying online, always do a search for money off codes or vouchers that you can use vouchercodes.co.uk and myvouchercodes.co.uk are just two sites that round up promotions by retailer.

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Scanner apps are useful to have on your phone. Trolley.co.uk app has a scanner that you can use to compare prices on branded items when out shopping.

Bargain hunters can also use B&M’s scanner in the app to find discounts in-store before staff have marked them out.

And always check if you can get cashback before paying which in effect means you’ll get some of your money back or a discount on the item.

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Reforms can help Argentina break free of its history

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The writer is president of the Inter-American Development Bank

Argentina’s history has been marked by recurrent economic crises. Breaking free from this history requires a more efficient public sector and a dynamic private sector that generates opportunities and serves as the engine for growth. 

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Argentina’s current government, led by President Javier Milei, has been taking decisive steps in this direction. In just seven months, it has achieved remarkable progress in restoring much needed fiscal balance by turning a primary deficit of 2.9 per cent of GDP at the end of 2023 into a surplus of 1.5 per cent of GDP by the end of August this year. 

It hasn’t been straightforward. Argentina raised revenue and reduced spending by cutting subsidies, infrastructure spending, public sector wages and transfers to subnational governments, while increasing utility rates and levying special taxes. 

To stay on track, public spending must become more efficient and equitable. In 2018, our estimates at the Inter-American Development Bank indicated that up to 7 per cent of GDP could be reallocated, with inefficiencies in transfers and subsidies of 3.3 per cent of GDP. It remains paramount to continue improving spending efficiency and redirecting resources to better support the most vulnerable Argentines. With that goal in mind, the IDB is working closely with the government to improve spending efficiency and strengthen social protection.

But improving Argentina’s public accounts and enhancing macroeconomic stability is only one part of the story. The ultimate objective is to create job opportunities and deliver lasting inclusive growth. This is where a partnership between a committed public sector and a vibrant private sector can be a powerful force for change.

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Argentina must offer clear incentives for private sector innovation, job creation and productivity-enhancing financing. This requires a regulatory framework that promotes efficiency and attracts private investment. To this end, the Milei government has been actively streamlining a long list of regulations and controls. When the government ensures a favourable business climate, the private sector can leverage this foundation to invest and drive progress. Such an approach would enable Argentina to break free from boom-bust crisis cycles.

Argentina is uniquely positioned to benefit from the world’s growing need to address major shared challenges such as food security, among others. In fact, Argentina perfectly illustrates what Latin America and the Caribbean as a whole have to offer the world.  

Argentina plays a crucial role in global food security. It is the world’s largest exporter of soyabean oil and meal, the second-largest exporter of corn, and the third-largest exporter of soyabeans. The country is also home to the world’s third-largest lithium reserves, making it a key player in the global energy transition and a main actor in the critical minerals supply chain. These opportunities, along with the government’s reform programme, should give Argentina renewed investor appeal. 

Promoting sustained growth will also require tapping into new opportunities in other areas — for example, in telecommunications networks, in manufacturing and agriculture, and in the country’s potential for playing a greater role in global supply chains. Financial intermediaries such as the IDB can catalyse this momentum. 

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To underscore our commitment to Argentina’s progress in both the public and private sector, the IDB is supporting the country on two fronts. First, to enhance government operations in areas like spending efficiency, energy subsidies and social protection, in 2024 the IDB expects to provide Argentina more than $2.4bn in public sector loans — this includes both approved operations and forthcoming ones that we expect to submit to the IDB board for approval. The latter includes a policy-based loan currently under negotiation that aims to increase the efficiency of the tax system and improve the quality of public spending.

At the same time, the IDB’s private sector arm, IDB Invest, plans to take advantage of its new business model and capitalisation to invest in or finance more than 20 private sector projects worth $1.4bn in agribusiness, infrastructure, energy and mining over the next two years. For example, we have three lithium and copper operations across various provinces, especially in Salta.

A lasting transformation in Argentina will depend on a bold private sector that seizes these and other opportunities to create jobs and drive growth. An efficient public sector, streamlined regulations, strong social protection and a private sector that steps in and steps up, can create a virtuous cycle of stability and inclusive sustained growth. Past need not be prologue for Argentina.

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What is the ECB’s outlook for Eurozone interest rates?

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Investors are likely to be following the European Central Bank meeting on Thursday for its outlook on Eurozone interest rates, after the market was forced to radically rethink its forecasts in recent weeks.

The ECB is now overwhelmingly expected to cut the rate on its key deposit facility by 0.25 percentage points, to 3.25 per cent, at the two-day meeting in Frankfurt. But that outlook is a marked contrast to the consensus after September’s meeting.

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Last month the central bank opted to cut borrowing costs for a second time this year, to 3.5 per cent. However the firm consensus among economists was that it would hold steady in October and only move again in December.

That view changed as a steady drip of weak economic data for the bloc pointed to shrinking economic activity, especially in Germany, its largest economy.

Eurozone inflation fell more than expected to 1.8 per cent in September — the lowest level in more than three years and below the ECB’s target of 2.0 per cent over the medium term. Germany’s economy is likely to shrink for consecutive years in 2024, according to government forecasts, in what would be the longest slump in more than two decades.

The ECB is now expected to cut by another 0.25 percentage points in December, followed by several cuts of the same size early next year. Economists expect the ECB’s key deposit facility rate will fall to around 2 per cent by next summer.

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However the market will also have to adjust to a change in the ECB’s communication strategy on Thursday. RBC Capital Markets told clients that rather than stressing its “meeting-by-meeting approach and highlighting that rates will stay restrictive for now”, the central bank will point out that rates are now on track to a “more neutral level.” Olaf Storbeck

Will UK inflation drop below the BoE’s target?

UK inflation data on Wednesday is likely to be the decisive factor on whether the Bank of England will speed up the pace of rate cuts this year.

Economists polled by Reuters expect annual headline inflation will show a decline to 1.9 per cent in September, from 2.2 per cent in August and July, as the falling price of crude oil eased the pressure on motor fuel prices.

That would mean headline price growth had fallen below the Bank of England’s long-term target of two per cent for the first time since April 2021. This week Andrew Bailey, governor of the Bank of England, said the bank’s rate-setters could be “a bit more aggressive” on lowering borrowing costs if inflationary pressures continued to wane.

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However economists and investors are likely to focus on inflation in services, a key part of Britain’s economy. Services inflation accelerated to 5.6 per cent in August from 5.2 per cent in July, but analysts are expecting the number to decline to 5.3 per cent in September.

Ellie Henderson, an economist at Investec, said the decline in services inflation is likely to come from falling prices in restaurants, hotels, airfares and private school education.

The trend for services will help shape expectations for inflation for the rest of the year. Economists, including those at the Bank of England, expect headline inflation to rise to 2.5 per cent at the end of the year,

But Henderson warned that if slowing price growth is largely down to temporary factors such as airfares and fuel prices “then the victory party on inflation might end up being delayed for another few months.” Valentina Romei

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Will US consumer activity pick up the pace?

Investors’ attention is turning to data that tracks consumer behaviour as the Federal Reserve said its policy on interest rate cuts is being driven by economic strength rather than price pressures.

Traders will be watching September retail sales figures on Thursday to see if consumer spending has strengthened further after a surprise growth of 0.1 per cent, month-on-month, in August. Forecasts compiled by FactSet suggest the headline rate will rise 0.4 per cent or 0.25 per cent after car sales, typically a more volatile number, are stripped out.

Market expectations for a series of rapid rate cuts from the Fed this year were dealt a huge blow after bumper September jobs data indicated the resilience in the US economy.

“I think retail sales and the consumer really will remain the driver (of market interest), but there is an easing of pressure given the strength of the jobs data,” said Leslie Falconio, of UBS Asset Management’s chief investment office.

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Thursday’s report may however be skewed by Hurricane Helene which slammed into the US south-east late last month. Storm-affected headline numbers could present a problem in following underlying trends in data for several months, analysts have warned, with this week’s Hurricane Milton expected to make October numbers harder to parse, too.

“We’re anticipating a challenging period over the coming weeks of accurately assessing the impact of recent developments on the real economy,” Ian Lyngen of BMO Capital Markets told clients.

“Retail sales, personal consumption, GDP, and even the payrolls data could be distorted by the storms and subsequent rebuilding efforts.” Jennifer Hughes

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