The poverty premium: a customer perspective

Authors: Sara Davies and Lorna Trend
Funded by: Barrow Cadbury Trust / Fair By Design
Published by: University of Bristol
Publication date: November 2020

This three-stage, mixed-methods research study explored recent changes in the poverty premium landscape, to understand if the costs or types of premiums had changed over the last few years. It included:

  • A review of the recent evidence about interventions designed to reduce or eradicate the poverty premium.
  • A survey of 1,000 people living in low-income households3 who had contacted national poverty charity Turn2us for help, asking how they pay for services, and how well they were managing financially.
  • Four focus groups with people in low-income households, examining a different dimension of poverty, such as age, financial difficulties, or having a young family.

This study showed that poorer households were spending the equivalent of 14 weeks’ of food shopping just to access the same services as people who are better off:

  • 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 could cost around £200 more a year (between £194-£207) and personal loans could cost more than £500 extra
  • Being on the best energy prepayment tariff could 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.
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