The Sun newspaper has accused E.ON and charity Age UK of deception and profiteering based on claims that the provider’s deal endorsed by the charity has led to hundreds of thousands of pensioners being overcharged.
The timing of the allegations has been called into question, as red top’s apparent exposé comes on the very same day that they launch their own energy switching service, in partnership with The Big Deal.
Age UK, whose chief executive Tom Wright was earlier this month announced as the head of the new fuel poverty watchdog committee, endorsed the deal launched by E.ON in January.
The Age UK two-year fixed rate tariff offered by E.ON is designed for customers aged over 60 with the aim of bringing “peace of mind that your gas and electricity prices are fixed for two years”, and a guaranteed good deal for a demographic all too often disadvantaged by failures, complexity and overcharging on the part of the energy industry.
The Sun’s accusations are twofold:
On the one hand, they argue that the Age UK tariff is far from the best deal available from E.ON. Depending on which paragraph of the Sun’s article is accurate, the tariff has a representative cost of between £939 and £1,049 (E.ON themselves cite the average as £948), placing it between £266 and £156 more expensive than the provider’s cheapest dual fuel tariff; a one-year fix with an average price of £783. With some 152,000 customers signed up to the deal so far, they argue that Age UK is responsible for pensioners overpaying a total of £37 million each year.
When the deal was launched in January, it was the cheapest two-year fix offered by E.ON, at around £100 cheaper than its previous incarnation launched the year before.
The accusations have prompted Ofgem to announce an investigation into the deal, with energy secretary Amber Rudd saying: “I take very seriously this allegation that Britain’s pensioners are being misled.”
Age UK has not disputed the figures given, but has roundly rejection the Sun’s “interpretation” of them and the allegations that come with it.
A spokesman for the charity said: “We launched the most competitive, fixed two year energy tariff available anywhere on the market on the 20th January this year, with no exit fees.
“Energy prices continue to change all the time and we have always advised older people to look out for new good deals and we will continue to do so.”
The cheaper deal offered by E.ON is a one year fixed rate deal, typically cheaper than two year fixed plans, where the added premium pays for the “peace of mind” it is intended to bring. Age UK’s deal does waive the £70 exit fee that comes with the one year fix, and also comes with E.ON’s price alert system, which provides those signed up to the plan with an alert whenever a cheaper deal is announced.
The fixed nature of the Age UK plan is a genuine selling point, as one of the biggest problems with overcharging from energy providers comes when customers on certain deals have their tariff switched to the more expensive ‘standard plans’ at the deal’s end. The waiving of exit fees and the automatic price alert from the Age UK deal provides a reasonable get out when the fixed deal does become expensive.
The second accusation comes from information apparently leaked to the newspaper, showing that Age UK has received some £6 million from E.ON as part of this deal. This is equivalent to £41 per customer, though Age UK claims that the commission they receive is closer to £10.
The implication is that this amounts to profiteering, rather than simply charitable donations. The article admits that the payments are “not illegal” but implies deception and malpractice, describing the money as being “tucked away” in the charity’s accounts and claiming that it was received “in return for pushing expensive tariffs to the elderly”.
To further hit home the allegations, they cited CEO Tom Wright’s (to whom they gave the scathing sobriquet “scandal fat cat 1”) six figure salary, private school education and the value of his home, which has scandalously gone up by 70% in the last 13 years.
The payment of large salaries to CEO’s of charitable organisations has been subject of scrutiny of late, though the acquisition of highly qualified individuals to take on the responsibility of running large organisations does not tend to come cheap.
According to charitycommission.gov.uk, Age UK’s annual expenditure is at £169 million of which £83.9 million goes on charitable activities, and the next largest sum – £77.8 million – goes on trading to raise further funds, with a return of £110 million each year. Based on these figures, Mr Wright’s salary amounts to just over 0.1% of the charity’s annual expense.
Age UK have not commented on the exact amount that they have received from E.ON, but have been open about the fact that the energy provider “have been generous supporters of our charity over and above the number of customers on the tariff”. This backs up their claim that the commission they receive per customer is £10, not £41 – the £6 million that has been identified is not solely accounted for by commission. Age UK have been working with E.ON “openly and above board” for around 14 years now, according to their spokesman.
At the end of the Sun’s article, a rather convenient beacon of hope is provided for their now disgruntled older readers in the form of their latest (the third of its kind) switching service, ‘People Power II’, powered by collective switching initiative The Big Deal.
According to their website, the Big Deal starts with the premise that “too many tariffs make switching complex and confusing.” Different from conventional price comparison services, their modus operandi is to use the collective bargaining power of their large customer base to petition energy providers to offer the cheapest deal they can, in return for a draft of new customers. The result is one, blanket, cheap deal offered to all customers who sign up.
Last year, when they teamed up with the Sun for what was then the second time, the deal they came up with was a tariff costing an average of £892 per year – an exclusive deal offered to 10,00 customers, provided by First Utility but only available through the Big Deal themselves.
Given the larger customer base this time it is likely that the deal brought out may well be cheaper. Though if it comes with the early exit fees of £30 per fuel like it did last year, it is still uncertain whether it will match the best deals already available for equivalent plans. It is also not clear how long the price will be fixed for.
The Big Deal’s collective switching initiative it positive and may well work for many customers, but the timing of its announcement by the Sun in the very same article that defames and brings weighty allegations of profiteering against the charity Age UK does raise questions about those very allegations and who benefits from them, regardless of their veracity.