Fair By Design’s study of 1,000 low income households [1] accessing the services of national poverty charity Turn2us, found that low income households were spending the equivalent of 14 weeks’ of food shopping [2] just to access the same services as those who were better off.

People struggling with money were paying an extra £478 a year for essentials like energy, credit and insurance because of the poverty premium:

  • Car insurance was the biggest contributor to the poverty premium, with some people paying nearly £300 more a year because of living in a deprived area. Additional charges for paying monthly instead of annually could mean an extra £160, for a total poverty premium of nearly £500.
  • Credit was expensive when on a low income, whatever form it took. A sub-prime credit card cost around £200 more a year (between £194-£207) and personal loans cost more than £500 extra.
  • Being on the best energy prepayment tariff was still be £131 more expensive than the best online-only one. But being on a fixed tariff could still be costly: not paying by direct debit cost up to £143 more a year.

The experience of the poverty premium was diverse among different age groups. Under 35s, for example, struggled with the costs of owning a car – that they might need to get to work. For over 65s, the poverty premium existed because of digital exclusion and not being able to access and engage with the market, to switch online to the best energy or insurance deal. Switching rates among families with young children tended to be higher. However, they were more likely to use expensive forms of consumer credit for household goods like washing machines or fridge freezers.

Read the executive summary and full report.

[1] Survey of 1,000 low income households in 2019. Research conducted by the Personal Finance Research Centre at the University of Bristol.

[2] Research by Turn2us found that the average weekly spend on food and non-alcoholic drinks in the lowest 10% income group was £32.80