The poverty premium

THE EXTRA COSTS OF BEING POOR

Around 14 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, 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.

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.

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.

BEING POOR COSTS MORE WHEN…

The washing machine breaks and you have no savings to buy a new one outright. So you go to a payday lender, or a rent-to-own company, where you’ll end up paying three times as much as other people pay up front for the same washing machine on the high street.

You’re not on the best energy tariff because you just don’t have time to find the best deal. And if you’re on a pre-payment meter, on average, you will pay a third more than paying by Direct Debit – which you can’t afford to do because you don’t have a fixed amount coming in every month.