MPs: Are vulnerable bank customers being treated fairly?

Source: BBC

The loss of bank branches is one issue affecting vulnerable customers
A poster saying that a branch of Halifax has closed

A committee of MPs is to examine whether vulnerable consumers are being treated fairly by banks and service providers.

Among other things the Treasury Committee will look at what banks are doing to stop financial exclusion.

It will also examine whether some vulnerable people are being overcharged for travel insurance.

Citizens Advice has claimed that people are losing as much as £877 a year each, because they are loyal customers.

As a result, the Financial Conduct Authority (FCA) and the Competition and Markets Authority (CMA) are already looking at whether some people are being over-charged for financial products.

“With customers expected to take more responsibility for their financial planning and resilience, bank branches closing, and the number of free-to-use ATMs falling, it’s becoming increasingly difficult for vulnerable customers to access certain financial services,” said Nicky Morgan, chair of the Treasury Committee.

The enquiry will also consider:

  • how financial firms define “vulnerability”
  • whether firms should have to have a legal duty of care to their customers
  • which customers suffer most when a bank branch closes
  • how Post Offices are filling the gap after a bank branch closure

Tom Selby, a senior analyst with the investment platform AJ Bell, said there was no easy answer to improve the situation.

“Although there are some customers who may more obviously be vulnerable, such as those diagnosed with Alzheimer’s, anyone can potentially become vulnerable at any time.

“Furthermore, it is not always obvious when someone is vulnerable. Many people suffer for long periods with debilitating depression, for example, without even their closest family knowing,” he said.


The Fair By Design Fund is committed to tackling the problems of financial exclusion that vulnerable, low income customers face, as illustrated in this report. FBD is seeking to invest in scalable FinTechs and other services that help low income families access the same resources as those that are better off, with the goal of eradicating the ‘Poverty Premium’ by 2023.

FbD’s Wayra-run accelerator businesses graduate in Westminster

Last week marked the end of year one of the Wayra-run Fair by Design accelerator programme and the event was marked by a celebration in the Houses of Parliament.  Congratulations go to Incuto, We Are Digital and JobSkilla who are all poverty premium busting businesses.  Watch the clip to see Andrew Rabbit of Incuto graduate.

Giles Coren Writes about Wagestream

Wagestream is featured once again in The Times and this time by the legendary, Giles Coren. It is great to get a big 👍 thumbs up 👍 from such an influential journalist. The link to the full article is below. Here is to ending the “poverty cycle” of the average UK worker one day at a time.

Wagestream Launches in Ireland

Source: Irish Times

Wagestream employees recently held a “funeral” for the payday loans industry following the demise of Wonga

Wagestream, a UK fintech start-up whose backers include tech titans Jeff Bezos and Mark Zuckerberg, is launching its services in Ireland.

The London-based company has developed what it describes as a “get-paid-as-you-go” platform that allows employees to access their wages early for a flat fee.

Wagestream which was only founded this year, says it is on a mission to end what it calls the “payday poverty cycle” experienced by thousands of households who experience difficulties making ends meet.

Its platform allows staff of participating companies to gain access to a portion of their wages ahead of time, thereby ensuring they don’t have to go overdrawn or be reliant on credit cards or high-interest payday loans.

More than 25 employers with over 25,000 staff are already using the service in the United Kingdom, following its launch there last month. Participants include gym chain David Lloyd.

Stunning results

“The early results have been stunning: from eliminating financial stress to improving productivity and retention, shortening the link between work and reward is good for businesses and their people,” said Wagestream co-founder and chief executive Peter Briffett.

The former chief executive of LivingSocial for UK and Ireland, said the start-up was looking forward to working with Irish companies who wanted to give their employees “greater financial freedom and control”.

Adam Hankin, a former head of sales for both Linked Finance and LivingSocial, has been appointed general manager of Ireland for Wagestream, which is also backed by social impact charities such as the Joseph Rowntree Foundation.

Mr Hankin said that despite strong economic growth, recent figures from the Central Bank showed that many Irish households were still struggling financially.

He cited recently published Central Bank research which showed that 350,000 people were customers of high-cost moneylenders in Ireland last year, borrowing €268 million at interest rates of up to 288 per cent.

Crippling problem

“The crippling problem of predatory, high-interest moneylenders remains: Ireland’s working population should be given the freedom of accessing their earned income, removing the inflexibility they currently face with the monthly pay cycle,” said Mr Hankin.

According to Wagestream, its service can be deployed by companies without impacting cash-flow, payroll or timekeeping processes, and employers can opt to implement it as an interest-free option for teams.

The start-up last month raised £4.5 million (€5.09 million) in funding from backers which included QED Investors, Firestartr, and Village Global, a $100 million (€88 million) venture capital firm that promises mentorship from tech figureheads such as the founders of AmazonMicrosoftFacebook and LinkedIn.

The London Mayor’s Co-Investment Fund and the Fair by Design fund, whose charities include Big Society Capital, Nominet Trust and the Joseph Rowntree Foundation, are also supporters of Wagestream.

Fair by Design is recruiting

Ascension Ventures is looking for a full-time Marketing Manager with a focus on our Fair By Design social impact fund.  
Get in touch if you know any good candidates with 2-3 years experience (digital marketing, social media, thought leadership, and great written skills) Thanks !  Read the full Job Description here:

New automatic energy switching service launches

A new automatic energy switching service that promises to move you whenever a cheaper deal comes along launches today.

Weflip, from price comparison firm Gocompare, is a website that will continually search to identify a cheaper energy tariff – which it will then move you to.

Auto-switching uses computer algorithms to track and identify potential savings based on your energy usage, meter type and current tariff.

Read more here

Fair by Design gives evidence to APPG on Poverty

Campaign Director, Lucie Russell and Lis, one of our Campaign Ambassadors today gave evidence to the APPG on Poverty.  Lis shared some of her experiences of living with the poverty premium, paying more for essential items and the knock on effects that has – including for childcare: “if work is a way out of poverty why are there still so many barriers for women”.

Fair by Design Roadmap launched

The Fair by Design campaign has recently launched its Roadmap for ending the Poverty Premium.  Co-Authored by a number of high-profile partners and supporters, the Roadmap makes recommendations for policy makers, regulators and corporates on how they can play their part in ending the Poverty Premium.  You can download the Roadmap here.

Starling names new clients for banking-as-a-service offering

Source: Starling Bank

Starling, the leading digital bank, is expanding its Banking-as-a-Service and Payment Services offer, bringing white label banking services to the UK and enabling other organisations to offer retail banking and make payments.

Access to Starling’s proprietary, cloud-based Banking-as-a-Service technology via Starling’s APIs will allow companies to launch their own bank accounts and provide customers with payment services such as debit cards. The move aims to inject competition into a market that has been dominated since the 1960s by the big four clearing banks — Barclays, HSBC, Lloyds Banking Group and RBS.

By opening up its APIs in this way, Starling is spearheading a new movement, where different businesses – ranging from major banks, government departments and emerging FinTech businesses – can develop and scale new financial products quickly and efficiently without the need for long development lead-times and complex legal arrangements.

Depending on a client’s individual needs, they can pick and choose components, or product features, from Starling and as they are using Starling’s banking license, they do not need to become a regulated entity. Clients also have access to all the major payment schemes in the UK and Europe.

In Payments Services, using Starling’s APIs, customers can quickly integrate into UK and European payment schemes to access Faster Payments, direct access to Bacs and SEPA, the Single Euro Payment Area.

Starling’s Payment Services and Banking-as-a-Service clients include the French challenger bank Ditto, government departments such as the Department for Work and Pensions, and savings and investment marketplace Raisin UK.

Starling is already supporting several FinTech companies and today can announce that it is working with Instarem, Vitesse, Incuto and AccessPay and has a number of strategic partnerships with companies such as Vocalink, CurrencyCloud, Form3, Railsbank and Bankable. It is also working with FIS Global, the international provider of financial services technology and outsourcing services, which is looking to launch using our services.

Anne Boden, chief executive of Starling Bank, speaking today at the PayExpo 2018 conference in London, said:

“The banking transformation has begun, we’re enabling customers to pick and choose the applications and services they need and how they use them.

“The API economy is far more important and relevant to banking than PSD2 and Open Banking. It is changing the rules of the game and does not need legislation for its survival or existence. We’re proud to be one of the first real implementations of this model for the banking industry.”

CAB highlights ‘loyalty penalty’ & lodges super-complaint

Citizens Advice has revealed customers who stay loyal to their providers are losing out on over £4 billion a year.  The national charity has today lodged a super-complaint with the Competition and Markets Authority (CMA), calling for the regulator to outline how the problem can be fixed.  The practice of overcharging loyal customers is widespread and Citizens Advice has repeatedly warned that loyal consumers are being ripped off.

Research by Citizens Advice found that across 5 essential markets (mobile, broadband, home insurance, mortgages and savings):

  • British consumers lose £4.1 billion a year to the loyalty penalty.
  • 8 in 10 people are paying a significantly higher price, in at least one of the markets, for remaining with their existing supplier.
  • The loyalty penalty is, on average, £877 per year – equal to 3% of the average household’s total annual expenditure.

“It beggars belief that companies in regulated markets can get away with routinely punishing their customers simply for being loyal. As a result of this super-complaint, the CMA should come up with concrete measures to end this systematic scam’ says Citizens Advice Chief Executive Gillian Guy.

The Government’s price cap in the energy market will bring down loyal customers’ bills by £75 per year on average. Citizens Advice analysis shows that excessive prices for loyal customers can be just as high – if not more so – in other markets.

The charity also found the loyalty penalty is disproportionately paid by vulnerable consumers, such as older people and people with mental health issues. These groups are particularly likely to struggle with switching.

In one example, Citizens Advice helped an elderly couple whose daughter went to the charity after finding her parents were paying nearly £1000 a year too much on their home insurance. The couple, who are both in their 90s, had been with the same company for 6 years and over that time their premium had continually risen.

This is the fourth super-complaint Citizens Advice has made since being given the power in 2002. Their complaint on payment protection insurance (PPI) in 2005 helped to generate a huge win for consumers, with at least £32.2 billion returned to customers in refunds and compensation so far.

Citizens Advice have identified the scale of the problem in 5 essential markets – but it knows loyal customers are penalised elsewhere too. By submitting this complaint the organisation is asking the CMA to investigate all markets where the loyalty penalty exists. Because the sectors are so diverse there is no one-size-fits-all solution. The CMA will need to work closely with other regulators and the Government to ensure the right action is taken in each market.

Read more in this article in The Independent

Mind the Gap on Contents Cover

‘The less money you have the less likely you are to be able to afford insurance, and if an incident occurs you are then hit over the head with a lack of money to cover the cost of its impact’.  We agree with Charlie Halkett…it’s time to end the insurance Poverty Premium.  Read her full article here.


Ofcom sets out plans to stop mobile users paying for handsets they already own!

The telecoms regulator has announced new proposals to stop mobile phone users paying for a handset they’ve already bought. But you don’t need to wait for a change in the rules – if you’re out of your minimum contract term, check now if you can switch and save £100s a year.

The Ofcom consultation published today estimates some 1.5 million mobile phone users are still paying instalments towards a handset they’d already paid for. The regulator says it’s “unacceptable” that mobile providers are not transparent about the separate costs of a handset and airtime within a contract.

It’s now consulting on two possible solutions. Mobile firms could be required to clearly break down the different costs within a contract – or they could even be forced to move customers to a cheaper default deal once their minimum contract term is up.

Today’s announcement follows a major report from Citizens Advice last week, which found some mobile users pay up to £38/mth for a phone they already own.

How could the rules change?

The regulator says it’s consulting on two possible options – it hasn’t yet said if it might enact just one of the proposals or both:

  1. Greater transparency on prices. This would require mobile firms to break down the cost of the different parts of mobile packages. The information would be provided clearly when you first sign up to a contract, and again at the end of the minimum contract period.

    This builds on Ofcom’s existing plans to require mobile providers to send customers alerts when their initial contract is coming to an end.

  2. Automatic fairer tariffs at the end of the minimum contract period. This would mean mobile firms would move customers to a different ‘default’ deal when their minimum contract period ends, so they stop paying for their handset, and instead pay only for airtime.

Ofcom will be seeking comments on these proposals until 7 November. It will then look at the responses and evidence before publishing detailed proposals in the New Year.

We asked the regulator when the proposals could come into effect and it told us there were no definite timescales, but it could be “early next year”.

What does Ofcom say?

In its report today, the regulator said: “While most customers receive good value for money, Ofcom is concerned that a significant minority continue to pay the same price after the end of their minimum contract period, often 18 or 24 months. We estimate that 1.5 million consumers are in this situation, and are still paying instalments towards a handset that they have already paid off.

“We are also concerned that, when a mobile customer signs up for a bundled contract, providers are not transparent about the respective costs of the handset and the airtime. This means customers cannot tell how much they are paying for the different parts of their deal.

“We think this is unacceptable. Consumers should be able to clearly identify the goods and services they are paying for, so they can make an informed decision about what to buy – and what to do when the minimum term of their contract ends.”

New computer boost for Essex residents

Essex residents are learning how to make the most of the online world with brand new computer equipment.

Sanctuary Housing has teamed up with Mitie’s property management business to provide Rayleigh & Rochford District Association for Voluntary Service (RRAVS) with £3,000 of laptops and tablets.

These will be used for computer training courses teaching the basics of the Internet and email, the next of which will be held at Bell House scheme for older people in Great Wakering.

The two-hour Computer Access Training sessions will run for five weeks and will also show residents how to edit pictures and use social media.

Read more here

Goodbye Wonga, hello ‘Get-Paid-As-You-Go Wagestream service

Fintech startup Wagestream, whose ‘Get-Paid-As-You-Go service allows workers to access their monthly wages in real-time, has launched its revolutionary service in the UK. The company aims to end the ‘payday poverty cycle’, and last-resort measures like payday loans along with it.

Read the London Loves Business article here

Jeff Bezos and Bill Gates back UK FinTech startup Wagestream

Amazon’s and Microsoft’s billionaire founders have backed a UK FinTech startup that enables employees to get their salaries early.

According to The Times, Wagestream, which seeks to put an end to the “payday poverty cycle”, raised £4.5m from investors including Bill Gates and Jeff Bezos.

The startup has created a mobile app which enables employees of participating businesses to gain access to funds from their salary packages for a flat fee of £1.75.

The total sum is then taken from the employees’ salaries on pay day.

Wagestream has launched a pilot with 25 businesses, employing 20,000 people.

Participants to date include gym chain David Lloyd.

Peter Briffett, the founder, said he hoped to “stop people getting into cycles of debt and poverty”.

“By giving workers access to their earnings, they can stop making financially distressing decisions such as taking out a payday loan. There is an instant link between work and reward,” he added.

The news of the raise comes weeks after the collapse of Wonga, widely credited with being the UK’s biggest payday loan provider.

Wonga, founded in London in the Autumn of 2006, provided “short-term, high-cost credit” and had operations in the UK, Poland, Spain and South Africa.

Bill Gates and Jeff Bezos among backers of £4.5m Wagestream start-up fund

The founders of Amazon and Microsoft have backed a London start-up that allows workers to access their wages before payday.

“Get-paid-as-you-go” platform Wagestream has received £4.5m of funding from supporters including technology billionaires Jeff Bezos and Bill Gates.

Read moreWonga goes under: Controversial payday lender placed into administration

Wagestream, which aims to end the “payday poverty cycle”, allows employees to access money that has already been earned for a fee of £1.75 instead of waiting for a fixed monthly payday, and has been launched the week after the collapse of payday lender Wonga.

Co-founder and chief executive Peter Briffett said: “As we mark the death of one of the payday loan giants, we’re pleased to finally present a viable solution to help give the UK’s workforce the financial freedom they deserve.

“While the wider and long outdated issue of monthly pay cycles is in desperate need of modernisation, for far too long legal loan sharks have been exploiting the most disadvantaged consumers with crippling high-cost loans.

“By giving workers access to their earnings, they can prevent themselves from going into overdraft, credit card debt or the worst case, applying for a payday loan.

“The poverty premium is real. Lower income workers can often pay more than everyone else, despite struggling to make ends meet. At Wagestream we give people access to their earned income when they need it, without the need for employers to alter their usual payroll frequency.”

Employers that have already partnered with the platform include Key Security and Fourth, who provide hospitality staff for brands including Travelodge, David Lloyd Clubs and TGI Fridays.

Other investors include boutique venture capital firm Qed Investors, the London Mayor’s Co-Investment Fund, which backs the capital’s technology startups, and Fair by Design fund, which invests in companies designed to make an impact on the poverty premium.

Read moreLending firm Wonga closes doors to new loan applications

Fintech providers say their products could turn credit unions into challenger banks

Andrew Rabbitt from Incuto, which develops financial technology for credit unions, said new tech could “make credit unions into community-focused challenger banks …. faster than a payday lender, more functional than a bank, and cheap”.

Pitching his fintech to the ABCUL conference, he said it could offer new possibilities to the sector, such as partnering with the Post Office to offer branch facilities where members can deposit and withdraw money.

“That’s the kind of stuff that fintechs can do, it comes with a bank account and sort code,” he said. “It allows you to connect in a really safe and ethical way with the people you want to get in touch with.

“It also reaches people currently sat in banks wondering if there’s somewhere better to go.”

“We’re using innovative tools to make it fast and slick.”

Read more here

Scottish Police Credit Union launch on the Incuto platform

The Scottish Police Credit Union have launched their re-designed website on the Incuto platform.

Designed by the team at Incuto, the new website allows existing and new members access better services from their credit union. Designed with security and reliability at the forefront of development, the Incuto platform allows the Scottish Police Credit Union to offer 24/7 loan applications, a great member portal and member self-service of their contact details and credentials.

Within 24 hours of the launch, many members had updated their details, requested withdrawals and transfers, all from with website. The responsive nature of the new website gives the ability for members to access their account and all features via a mobile interface.

The team at Incuto said ‘we are extremely happy with the launch and look forward to supporting the continual growth of the Scottish Police Credit Union’.

Visit the new Scottish Police Credit Union website here.

We’re Recruiting…

The Fair by Design Change Programme will be launched in 2018 and is seeking a new leader.  Find all the details here:

Barrow Cadbury Trust takes on management of the Fair by Design Change Programme

The Joseph Rowntree Foundation (JRF), launched the Fair by Design Programme on 9 November 2017 aiming to eliminate the poverty premium within 10 years.  Backed by JRF, Big Society Capital and Nominet Trust, we’re delighted to announce that the management of the Fair by Design Change Programme will be taken on by Barrow Cadbury Trust from December 2017.

Our bold ambition, to eliminate the poverty premium within 10 years, has two strands; the Venture Programme and the Change Programme, which tackle the issue from different perspectives and which we hope will together achieve our mission.

The Venture Fund will invest in and accelerate businesses tackling the poverty premium, while the Change Programme, starting in April 2018, will encourage the eradication of the premium by working with corporate providers, policy makers, regulators and by raising awareness through public debate.

A Director to manage the Fair by Design Change Programme will be recruited in the New Year.  More details of the Fair by Design Change Programme will be available in early 2018.

Bristol University Report on the Poverty Premium

Our research partners, Bristol University, have today published their report ‘Making the Poverty Premium History – A Guide for Businesses and Policy Makers’.

Authors: Sara Davies and Andrea Finney
Funded by: Economic and Social Research Council
Published by: University of Bristol
Publication date: November 2017

The Poverty Premium: when households in poverty pay more for everyday goods and services. First coined in the 1960s it may be an old concept but it remains an important social issue today. And for the poorer households affected it is a real and pressing problem. We estimate that the average low-income household in 2016 paid a poverty premium of £490. Of course, there is no such thing as an average low-income household – depending on households’ needs, preferences and circumstances, some will have paid less while others will have paid more. Much more.

This guide offers an evidence-based foundation for addressing the poverty premium which considers the particular roles of business and government. It focuses on the three most significant areas of the poverty premium: household energy, insurance and credit.

Read the report here.

Fair by Design Fund boosted by £1m investment

We are delighted to announce that Nominet Trust has boosted the Fair by Design Fund by £1m.  Renowned for transforming lives with tech, Nominet Trust challenges themselves and others to think differently about the relationship between tech and society.



Launch of the Fair by Design Fund Hits the FT

UK investors are being offered the chance to make money by helping the poor through a new fund. The Fair By Design fund will invest in companies tackling the so-called “poverty premium” — the extra costs the poorest pay for essential goods and services, such as energy, credit and food. About 6m households pay an average of £500 a year in higher charges…

Read the full article here.

Huffington Post – Designing Out The Poverty Premium

Just over a year ago, the Prime Minister stood on the steps of Number 10 Downing Street and boldly committed to ‘tackle the burning injustices’ that impact low income communities. Since that moment a lot has happened, but one thing that has not changed is the existence of the Poverty Premium in Britain.

The poorest in society still pay more for those basic goods and services that we all rely on compared to those who are better off. With recent economic trends such as an increase in the average household debt being racked up, this is not a problem we can ignore any longer. A recent academic study into the Poverty Premium, produced by the Bristol University Financial Exclusion and Poverty Unit, found that on average the Poverty Premium cost the households on the lowest incomes £490 per year but this cost could be much higher if people inadvertently made the wrong choices. For some, that amount is the equivalent of a month’s rent, or the cost of insuring their car for the year – necessary costs which many people take for granted.

My colleagues at PwC and I have been working for over three years now with business, Whitehall and the third sector to encourage the development of new solutions to try to tackle the Poverty Premium – focusing specifically on the energy markets and financial services (we recently highlighted in our report with TheCityUK the role of the financial sector in meeting unmet societal needs).

We’ve found a genuine desire from business to do the right thing but translating this into tangible measures is more difficult. Two organisations which have participated in our programme of work are seeking to change this. Big Society Capital and the Joseph Rowntree Foundation have now partnered with Ascension Ventures to launch Fair by Design – an investment fund and programme specifically designed to find and support innovative new ways to end the Poverty Premium…

Source – Huffington Post


Digital Agenda – £20m anti-poverty initiative

Telefónica-owned Wayra UK opens its latest tech accelerator programme this week, supported by a new multi-agency fund worth up to £20m with a focus on helping eliminate the ‘poverty premium’ by 2027. Wayra’s Open Future_ North facility is based in Oldham.

Fair By Design LogoA new tech accelerator programme with a focus on tackling UK poverty opens its doors in Oldham, Greater Manchester, this week – confirming the news of a fund supporting the programme reported in DigitalAgenda last month.

Wayra Fair By Design will support up to seven tech startups a year across the north, based in the town’s Open Future_ North accelerator. It will back startups seeking to tackle the ‘poverty premium’, which sees people from low-income households paying more for the same products or services – including energy, insurance, borrowing, transport and food – than those who are better off financially.

“It should not cost more to be poor,” said Gary Stewart, director of Wayra UK…

Source – Digital Agenda

Techcrunch – Wayra UK launches accelerator to tackle the ‘poverty premium’

Wayra, the Telefónica backed accelerator network, is launching a new startup program in the UK that aims to tackle the so-called ‘poverty premium’ — whereby people on low incomes pay more for some goods and services.

The program, called Wayra Fair By Design, will support seven startups per year, falling into four broad areas: energy (primarily electricity and gas); finance; insurance; and geo-based costs which can be imposed due to someone’s geographical residence, such as paying higher prices for food, transport and insurance. Wayra says digital exclusion may also factor in this category.

Accepted startups can expect to receive around £70,000 in cash and services, including access to Wayra’s mentoring and investor network, as well as opportunities to work with Telefónica and its partners; and full access to co-working space at the Open Future_ North building in Oldham, which opens tomorrow.

Wayra says the program will invest in a combination of Community Interest Companies and charities, as well as private limited companies, including tech businesses. Start-ups developing solutions to open up more affordable credit options would be ideal candidates for the program, it adds.

Commenting in a statement, Gary Stewart, Director of Wayra UK, said: “It should not cost more to be poor. An entrepreneur’s central task is to offer a compelling, sustainable solution to big problems, and we can think of fewer problems bigger or more worthy of a solution than this one. We are eager to work with start-ups to make real progress in the battle against inequality.”

The program is backed by a new investment fund — called the Fair By Design Fund — which Wayra says has £8 million ready to deploy now, and a goal of raising £20 million in total — to invest in companies tackling the poverty premium, both via the accelerator program and in separate investments across the UK.

Funding is coming from a partnership between financial institution Big Society Capital, social policy research charity the Joseph Rowntree Foundation, investment fund manager Finance Birmingham and VC Ascension Ventures. The latter two will be managing the new fund.

The fund will invest in companies from seed through to Series A stage and beyond, including seeking deal-flow and co-investment opportunities from other funds, VCs and angel investors.

In another supporting statement, Chris Goulden, deputy director of policy and research at the Joseph Rowntree Foundation, added: “Reducing the cost of essential goods and services is critical for solving poverty in the UK. The poverty premium costs low-income households on average £490 a year. With higher inflation and low wage growth, tackling these premiums is vital for families struggling to make ends meet. This fund is an important step towards finding viable solutions to reducing extra costs faced by those on low incomes.”  
Source – Techcrunch

£15m fund to fight poverty premium

A new £15m venture fund for businesses working to eliminate the poverty premium is set to be unveiled next month, as a new accelerator programme opens in the English north to support tech startups working to reduce poverty at home and abroad. Julian Blake reports.

Some cheer for the one in five UK citizens living in poverty. Early-stage VC firm Ascension Ventures is to manage a new £15m ‘Fair by Design’ fund, created to help eliminate the ‘poverty premium’ by 2027.

Government statistics show that 14m people – more than 20% of the population – in the UK now live in poverty. The poverty premium sees people in poverty or on low incomes paying more for the same products or services than those better off financially.

Ascension will run the fund alongside long-standing investment partner Finance Birminghamand others.

Ventures supported by the fund will be working to eliminate the poverty premium across four sectors: financial services, energy, insurance, and food/household goods. The fund will support a combination of community interest companies and charities, as well as for-profit companies including tech startups.

Since 2013 Ascension has invested, across four distinct funds, in over 40 early-stage companies across the UK. It has backed several social impact businesses, including Edukit, Flashsticks, GiveVision, Highbrow, Looop, Night Zookeeper, Percent and The Skills Academy.

Ascension is recruiting for two roles to help manage the new fund – a programme director and an investment manager. Both will be based out of Manchester.

The initiative is also backed by Big Society Capital and the Joseph Rowntree Foundation…

Souce – Digital Agenda

The Independent – The ‘poverty premium’ pushing the Just About Managing to the edge

Poverty isn’t cheap. A combination of effects, including being unable to take advantage of the cheapest ways and opportunities to pay for goods and services, means that low-income households pay an average of £490 more for essentials each year compared to households where money isn’t quite so tight.

And that is just the average premium; for some households it is far, far higher. According to the study carried out by the University of Bristol, poorer households typically pay between £350 and £750 in “poverty premium” each year. Single-adult households were the hardest hit, followed by lone parents.

While the £490 figure is a smaller amount than previous estimates – Save The Children had previously suggested it could be as much as £1,300 a year – it is a significant sum for just-about-managing families.

As the report states: “The average poverty premium of £490 per year is undoubtedly a significant sum to low-income households. It might represent a family holiday, enough clothes and shoes for the children, keeping the home warm in the coldest winter months, all things considered important for a reasonable quality of life and avoidance of social and material deprivation.”

Not-so-premium products

The reasons for the extra expense vary, but they range across a wide number of essential goods and services – like paying to withdraw cash (£9 a year), using a pre-payment meter (£38 a year), using higher-cost credit like payday loans (£55 a year) and paying higher insurance premiums because of living in riskier areas (£84 a year).

However, those are just the average costs. Depending on what services or products each household needs, the costs can be eye-watering. If a household is unable to qualify for mainstream credit then they may have to turn to a doorstep loan costing an extra £540 or a payday loan that costs an additional £120.

Katie Schmuecker, head of policy at the Joseph Rowntree Foundation (JRF) explains: “Sometimes the preferences of, and constraints faced by, low-income consumers compound the problem – such as when people can’t afford to pay upfront for insurance and must pay extra to pay monthly; or the need to keep a tight control over a limited budget leads to the avoidance of direct debit, even though it’s usually cheaper.

“Lacking the internet, transport or affordable credit, all of which help people to get a better deal, makes matters even worse. The picture changes, with new poverty premiums emerging – and some disappearing – as products and markets change.”

The poverty premium doesn’t just hurt the households it directly affects. By tipping just-about-managing families into poverty it costs the taxpayer a significant sum as well.

Research from the JRF suggests that poverty costs the UK £78 billion a year, which translates into £1,200 for every person – equivalent to 4 per cent of our GDP. £1 in every £5 spent on public services goes towards supporting people in poverty or dealing with the fall-out.

Ending the poverty premium was the foundation’s very first step in its recent ambitious plan to end UK poverty by 2030.

Ms Schmueker elaborates: “Tackling the higher costs faced by lower income households is vital if we are to bring down poverty levels. To achieve this, Government should task regulators with identifying and eliminating poverty premiums in sectors like energy. We also need to see new products that are designed to meet the needs of people on lower incomes and, where this isn’t possible, provide other ways of compensating people for unfair additional costs.

“We also need people living in poverty to be given a bigger voice in the debate, which requires consumer organisations to have more funding, capacity and information to tackle the poverty premium.”

Source – The Independent

Acting on unfair poverty premiums must be a 2017 priority

The poverty premium costs low-income households on average £490 a year. With higher inflation forecast for 2017, tackling these unfair premiums on essentials will be even more vital for those who are just about managing, says Katie Schmuecker.

Reducing the cost of essential goods and services is as important as increasing incomes for reducing poverty in the UK.  The less people must spend on meeting their needs, the more cash in their pocket.  But unfair poverty premiums mean the poor are paying more for some essentials, exacerbating poverty and straining the budgets of the just about managing.

New research by Bristol University has laid bare the scale of the poverty premium for the first time.  They estimate that on average the poverty premium is costing low-income households £490 per year.  This research enables us to quantify for the first time the number of households subject to different types of poverty premium (see table).

Some premiums seem inconsequential, such as paying an extra £5 per year for a paper copy of an electric bill because you’re not online, or find it easier to keep on top of your budget with a paper copy. Others are eye watering, such as paying £540 over the odds for a doorstep loan because you can’t access mainstream credit or an additional £120 for a payday loan.

Averages can hide a multitude of different experiences, and the researchers found examples of families paying considerably more.  Take the single earner couple with one child who had an income of £16,500 per year, but were incurring a poverty premium of £1,860 because they had a prepayment meter for both electric and gas, paper billing for telecoms,  monthly payments to spread the cost of home contents and car insurance and several forms of high cost credit.  In another example an out-of-work family with an annual income of £9,800 was incurring a £1,300 poverty premium. Only an estimated 1% of low-income households were not incurring any sort of poverty premium…

Source – Joseph Rowntree Foundation

The Poverty Premium – When low-income households pay more for essential goods and services

Authors: Sara Davies, Andrea Finney and Yvette Hartfree
Funded by: Oak Foundation
Published by: University of Bristol
Publication date: November 2016

In the UK the poverty premium, the idea that poorer people pay more for essential goods and services, has been highlighted as an important social policy concern for low-income families.

This 2016 study revisits and advances earlier research conducted in 2010 by Save the Children. It reflects markets and household behaviour as it exists today, and, for the first time, explores how manylow-income households are actually affected by the poverty premium, and by how much.

The Poverty Premium (Key Findings) (PDF, 434kB)

Paying to be poor: uncovering the scale and nature of the poverty premium (PDF, 1,365kB)

Paying to be poor (Methodological Appendix) (PDF, 720kB)

Paying to be poor (Costing Appendix) (PDF, 665kB)

Source – University of Bristol

Big Society Capital – Poverty Premium

People in poverty or on low incomes often pay more for the same products or services than people who are better off financially.

This is called the “poverty premium” – the extra cost of being poor.  The poverty premium is often dubbed the ‘double penalty’: in addition to not being able to buy many goods and services, people in poverty also end up paying more for the ones they can buy.

There is not one ‘poverty premium’, but many increments in cost that when added together can represent a significant drain on tight personal budgets. Such increments or premiums are most concentrated in four sectors and are typically centred around a specific set of issues: in energy & utilities and telecommunications, poverty premiums are paid through prepaid tariffs and/or lack of being an ‘actively switching consumer’; in financial services, the poverty premium manifests itself mostly through high-cost credit and issues around financial exclusion; and finally, in household goods, the rent-to-own model of buying household goods financed by extremely high-cost weekly payments (e.g. through shops such as BrightHouse) results in people paying high amounts for essential items, often three or four times the original price.

Potential social investment solution

Big Society Capital in partnership with Joseph Rowntree Foundation is developing a targeted holistic programme designed to eliminate the poverty premium by 2027.

It will do this in two main ways. First, it will develop a Venture Development Programme underpinned by research and evaluation, impact monitoring, and a strong advisory network of sector experts and mentors. This will support ventures primarily working to eliminate the poverty premium in the four key sectors of financial services, energy, telecommunications and household goods, but will also consider cost reducing ventures in areas of large wallet share for people in poverty (e.g. food). We are currently considering applications from fund managers to run this fund. Secondly, it will build a strong campaigning arm to advocate for better policy, influence corporate behaviour and inspire the public to rally around this issue.

Source – Big Society Capital

Chief Executive of Big Society Capital – Huffington Post

Cliff Prior CBE is Chief Executive of Big Society Capital. Prior to that he was CEO of UnLtd, the UK Foundation for Social Entrepreneurs. UnLtd has supported 13,000 people to start new social ventures.

Before UnLtd, Cliff was CEO of Rethink, the charity for people affected by severe mental illness. His earlier career includes work in counselling, youth, civil rights campaigning, social housing, supported housing, community care, offender resettlement, learning disability, dementia, research and development, and mental health.

Cliff is also a founding trustee of Clore Social Leadership, a non-exec at health innovation agency UCLPartners, and Comic Relief’s UK Grants Committee. He chaired the mission alignment group for the G8 Social Impact Investment Taskforce.

He has been an adviser to Government on health and medicines regulation, NHS modernisation, skills, and civil society.

Source – Huffington Post

The Guardian – Poverty premium: why it costs so much more to be poor

Being poor comes at a cost. The best bank accounts, borrowing rates and energy tariffs are all reserved for people who are in a position to shop around. And if you do not have a clean credit file or access to up-to-date technology you can expect to pay more for almost everything you buy.

In the summer, Citizens Advice Scotland reported that people living in poverty were paying roughly 10% more for essential goods and services, while according to a report from 2014 by the east London charity Toynbee Hall, residents of Tower Hamlets pay a “poverty premium” of up to £1,014 a year, consisting mostly of higher energy costs, car insurance and loans.

This isn’t a matter of not being a savvy shopper or failing to compare prices before you buy. It is a matter of not having access to the best deals. When every penny counts, being charged more than the next person for the same goods and services can cause bigger problems further down the line.

The cost of being poor

Higher energy costs can be the hardest to avoid. Energy bought through prepayment meters is still more expensive than that bought on a standard tariff paid for by direct debit, and the premium over online accounts is even bigger. In July, Citizens Advice said prepayment customers were paying on average £226 a year more for their energy than those on the cheapest online deals.

Householders can switch between prepayment tariffs, but there is little competition so the choice – and saving – is limited. To get the best deals, as well as internet access, you need a good credit record. Even with these, private renters can find it hard to switch payment types. While the regulator Ofgem says a landlord cannot prevent you switching meters, you may have to switch back at the end of the tenancy, and the associated costs could be off-putting…

Source – The Guardian

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