Research from Virgin Media O2 shows that as much as £87m each year is being spent by pensioners on overpayments for mobile phones, as three of the four UK mobile network operators (EE, Three, and Vodafone) continue to charge millions of customers for handsets that have already been paid off.
More than six in ten (60%) over 65s report that their bundled mobile contract expired over 12 months ago, meaning they’ve spent more than a year unknowingly paying for handsets they already own. On average, this overpayment practice is costing affected retirees over £170 per year, which for some is more than a week’s state pension payment.
The practice of combining airtime costs for minutes, texts and data with the cost of the handset – known as a bundled contract – can lead to consumers overpaying for their smartphones as they receive little discount, if any, at the end of their contract yet continue to be charged the same amount each month. Older people are particularly at risk of falling foul of this, with one in five (21%) unclear when their mobile phone contract ends.
According to the consumer charity Citizens Advice, over half (58%) of the average monthly bill is attributed to the cost of the device – meaning that, as a group, older consumers are spending tens of millions of pounds each year on phones they already own.
The findings come amidst an ongoing cost of living crisis, with as many as 2.1 million people over 65 living in poverty and one in seven skipping meals or expecting to do so in the coming months, according to research by Age UK.
When informed that millions had overpaid for their handsets and millions more were at risk, 8 in 10 (87%) over 65s said they felt cheated and were demanding change.
Worryingly, over half (51%) were also unaware of savings they could make by keeping their existing device and switching to a SIM only deal at the end of their contract. Alternatively, elderly consumers have the option to move to a provider that offers split contracts – where airtime and the smartphone loans are split into two separate payments – if they want to upgrade their device and avoid overpaying for their handset in the future.
O2 was the first major operator to introduce split contracts more than a decade ago with O2 Refresh. These contracts clearly separate the cost of the device from the cost of the airtime (date, minutes and texts) so customers stop paying for their handset once it’s been paid off. The overwhelming majority of devices O2 sells come on these plans.
O2 is also the only mobile network operator to discount its bundled contract bills for direct customers once they’ve paid for their handset by automatically rolling them onto an airtime only plan, ensuring they never overpay for a phone they already own.
Gareth Turpin, Chief Commercial Officer at Virgin Media O2, said: “Many pensioners are at risk of paying over the odds for phones they already own because of opaque and confusing mobile contracts, with most unaware they are doing so. We urge anyone who is out of contract and thinks they might be overpaying for their phone to contact their provider, get the facts, and then take action by switching to a split contract or airtime only plan.
“With millions of customers from other operators stuck on contracts that can lead to them overpaying for their handset, we’re sounding the alarm on this smartphone swindle and asking the industry to step up to help consumers save money and make more informed decisions when it comes to their mobile phone contracts.”
Abigail Wood, CEO, Age UK London, said: “When we talk about the cost of living the conversation is often fixed on heating and eating, but confusing utility bills are hugely problematic. Virgin Media O2’s research findings are alarming and shows the extent that over 65’s are losing out. This is at a time when many older pensioners are already struggling to make ends meet and a mobile phone can be a lifeline, providing access to the many services not available offline and most importantly helping them stay connected.”
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