THE EXTRA COSTS OF BEING POOR
Around 10 million people in the UK who live in poverty pay extra for a range of essential goods and services such as energy, loans, insurance and for buying items for their homes. These extra costs – the poverty premium – lock people in a cycle of poverty.
According to research from the Personal Finance Research Centre at University of Bristol, (‘Paying to be poor: the scale and nature of the Poverty Premium’ 2016), the poverty premium costs the average low income household £490 a year, but for more than one in ten of these households it costs at least £780.
And imagine having to pay around £300 a year more than other people for energy alone, just because you are poor. Add to that the higher costs of borrowing money, or having to buy household essentials through rent to own, as well as your daily bus fares costing more than a monthly pass because you don’t have the money to pay up front.
We estimate up to three quarters of people on low incomes in the UK are likely to be paying extra to a range of providers simply because they are too poor to benefit from the best deals. That’s the poverty premium.
It doesn’t sound fair and it isn’t, but it doesn’t have to be this way. Products and services can be redesigned to meet the needs of everyone.