Have you ever come across the idea where spending £20 on a pair of cheap shoes costs 10 times more in the long run than buying a £200 pair that lasts for years? But what do you do if, at the time, £20 is all you can afford?

What if I told you that it is exactly the same thing for those on the sharpest end of the wealth gap, a daily reality for millions (14 million to be exact), who pay more for products and services than those who are better off?

Cue: the Poverty Premium, where your neighbour may be spending an extra £444 a year to pay their utilities, insurance, food, payments at the shop...You know, pretty much any of the essentials you need to live. All because they are unable to afford the “luxury” of accessing the discounts of a direct debit, so they have to rely on expensive “pay-as-you-go” energy meters.

But surely it is worth setting up that direct debit anyway, right?

Wrong.

Because when your income is irregular, your balance is low, a direct debit is risky. All it takes is one failed payment to trigger a £30 bank fee. And when £30 is the only cash you have to make sure you eat that week, you’ll do anything you can to make things easier, including paying the ‘expensive way’. The one which will cost you £444. Extra. Because of how you need to pay for goods and services. 

Unfair by design: The same applies for car insurance, which has  become increasingly unaffordable for those on the lowest incomes despite being a lifeline for accessing work, education, caring responsibilities and everyday opportunity. Think about that 18 year old who can’t afford uni, but needs a car to get to his job one hour away at 3am, with no public transport in sight. He wants to contribute, to “pay his dues” . But the money he earns will be eaten up by the insurance he needs for the very car affording him a lifeline. 

As highlighted in the new report published by the Institute of Faculty of Actuaries, and written by Rebecca Deegan, Director of Fair by Design, the system explicitly has been designed in this way, entrenched in pricing models that no longer reflect the real world we live in, let alone an equitable one.  It is a system that punishes people for where they live and what they earn.

A £2.8 BILLION drain: The poverty premium costs an estimated £2.8 BILLION to the British Economy, meaning the struggle is no longer a personal one. At a time where billionaires like Graham King are raking in £4.8 million of government money every.single.day and £90 million in dividends*, the inequality becomes difficult to ignore. King, who lives in Mayfair, definitely doesn't need to worry about how much his car insurance is just because of his postcode. So why should others?