Save, make, understand money

Household Bills

Pensioners wasting more than £170 a year paying for mobile devices they already own

Emma Lunn
Written By:
Emma Lunn

The over 65s could be losing an entire week’s pension payment each year by paying for smartphones they already own, according to a network provider.

A study by Virgin Media O2 found that more than half a million pensioners are out of contract for their mobiles, with 60% reporting they’ve been so for more than a year.

The telecoms company revealed that most mobile tariffs from rivals EE, Three and Vodafone cover both the cost of the device and airtime, meaning many people could be paying a monthly fee for a smartphone they have already paid for in full.

On average, Virgin Media O2 calculates that this overpayment practice is costing affected retirees more than £170 per year, which for some people is more than a week’s state pension payment.

Bundled contracts

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 usually continue to be charged the same amount each month after their contract ends.

Older people are particularly at risk of falling foul of this, with one in five (21%) unclear when their mobile phone contract ends.

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.

Split contracts

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 (data, 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.

Virgin Media O2 claims that it 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.

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 of 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.”