Age UK energy tariffs scandal: what you need to know

Charities are in the headlines for all the wrong reasons again. This time, it is the turn of Age UK, which has been criticised over a commercial partnership with E.on to offer energy tariffs to older people.

What has Age UK done?

It's been alleged that Britain's biggest charity for old people accepted payments from businesses - including, most notably, one of the "big six" energy companies - to push products.

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An investigation by The Sun said Age UK received £6m from energy supplier E.on in referral payments related to co-branded energy deals. In particular, the charity reportedly marketed a two-year fixed-price tariff costing £1,049 a year as "great value", despite the fact it was found to cost £245 more annually than the cheapest deal E.on is offering now.

Around 152,000 customers signed up and, according to The Sun, Age UK made about a £41 kickback per person. The charity disputes that figure.

"It's all particularly rich when Age UK claims to campaign for lower energy bills for older people and warns in its literature about fuel poverty and older people's anxiety around higher heating costs," says Mark Bridge in The Times.

In addition, "the charity quietly but legally pocketed £47.6m last year from insurance firms, funeral plan providers and even lottery tickets", says The Sun. The newspaper said that in most cases, people could have got better deals and saved potentially hundreds of pounds by going direct to the companies rather than buying via Age UK.

What has the charity got to say?

The Charity Commission and energy watchdog Ofgem have both launched investigations, but Age UK says it has done nothing wrong.

"We're completely open that profits from our social enterprise (its business arm) support Age UK's charitable work," a spokesperson told The Sun. "We work with a wide range of market leading partners and carefully design and select our products and services to ensure they are appropriate for older people and we have very high levels of customer satisfaction."

It's worth noting in this case that the charity claimed the two-year deal was the market leader when it was launched at the beginning of last year and it did not engage in aggressive marketing or cold-calling to sell it. Customers were also able to transfer to a better deal without any exit penalties, but that relies on shopping around, something many older people do not practice.

Since the furore erupted last week, Age UK has pulled out of the partnership with E.on, which means the deal is no longer available to new and renewing customers.

Is this the first time Age UK has been criticised?

It would appear Age UK's commercial deals have caused concern for a while. Two heads of independent Age Concern charities told BBC Radio 4's Today show they refused to merge with Age UK in 2010, due to concerns over its commercial relationships.

Age Concern Okehampton & Torridge also refused to take part in the merger of Age Concern and Help the Aged into Age UK.

Barrie Duke, the charity's vice-chairman, told The Guardian: "To me, there is a great mismatch between Age UK and its philosophy and the work of Age Concern in small towns and villages.

"We are very uncomfortable selling insurance and other products which in today's world are all changing price and you could never ensure [the customers] were getting the best deal."

The Times has also reported on the charity's poor deals for several years. In September 2011, it ran a story on how Age UK’s E.on tariff cost £300 more than the cheapest tariff on the market. "This story isn't new. The charity hasn’t briefly lost its way," says Bridge.

What is going to be done about it?

While investigations by government groups are underway, a decision needs to be made about what exactly, if anything, Age UK has done wrong.

"There is nothing wrong with the commercialisation of charities if it enables them to better meet their objectives," says Bridge. "In this case, Age UK must answer to those who believe it has ripped off its beneficiaries, abusing their trust in the process – that's definitely not OK."

Others think the charity is wrong in principle to have struck up commercial deals to push products onto the people it is meant to be helping.

"Charities enjoy public support, including substantial tax benefits, but that support cannot be taken for granted," says William Shawcross, the chairman of the Charity Commission of England and Wales, in The Telegraph. "Charities must act in accordance with the values they claim to represent."

Is Age UK the only charity to be linked to bad news?

Unfortunately, no.

Last year, children's charity Kids Company collapsed amid allegations of mismanagement. As well as that, there was the sad story of 92-year-old Olive Cooke, who killed herself after being harassed for money by numerous charities - she received up to 267 begging letters a month plus phone calls. There have also been tales of charities selling data and "ill-judged political campaigning", says Shawcross.

Given the Charities Commission's failure to crack down on charities as a result of the previous scandals, many people aren't expecting any dramatic punishment for Age UK now.

The charity sector is "completely out of control" and its regulator is "not fit for purpose", says Gina Miller, the founder of the True and Fair Foundation, in the Telegraph. Miller added it is vital new legislative measures are introduced to guarantee accountability and transparency.