London, UK – July 5 2023 – 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.”
Calling for action
Virgin Media O2 is calling on the other mobile network operators to help put an end to this issue with three clear asks:
Consumers urged to split, switch, save and share
Alongside calling for change, Virgin Media O2 is asking consumers to check their bills to ensure they’re not unknowingly overpaying for a phone they already own. The provider has published four simple steps to help consumers save:
Notes to Editors
Results are based on an independent online survey conducted by Strand Partners on behalf of Virgin Media O2; n=5303 members of the UK population representative by mobile phone provider, household income, age, gender and UK region. This included 1,008 adults who are aged over 65.
To calculate the overpayment figures, respondents were asked about the current terms of their mobile phone deals, which operators they are with, how long they have been out of contract and how much they have been paying for their mobile phone bill.
Mobile phone operators generally sell two main types of contracts when people get a smartphone with their airtime (data, minutes and texts) plan:
Split contracts – where the airtime and the smartphone loans are split into two separate payments.
Bundled contracts – which combine the cost of a phone and airtime into one bill.
With bundled contracts, providers can continue to charge customers the same amount even after they’ve reached the end of their contract and paid off their phone. This means customers are being charged for a phone they already own.
With a split contract, like O2 Refresh, customers will automatically stop paying for their phone when they reach the end of their contract term, meaning an instant saving and no risk of overpayment. Any annual price rises also won’t apply to the device repayment – unlike on bundled contracts where a percentage price increase is typically applied to the whole bill.