Age UK told to review its involvement with energy products

The Charity Commission says the volatility of the market means there are 'significant risks' for charities participating in it

Energy: charity told to review its engagement with this market
Energy: charity told to review its engagement with this market

Age UK has been told by the Charity Commission to review its engagement with the energy market immediately because of the "significant risks" associated with it.  

The charity suspended its energy tariff with E.ON in February after The Sun newspaper claimed that Age UK was earning £6m a year from selling a two-year, fixed-rate promotional tariff with E.ON to older people.

The newspaper claimed that the tariff would result in pensioners typically paying £1,049 a year, £245 more than the firm’s cheapest rate for 2015.

Ofgem, the energy industry regulator, confirmed in a statement today that there was "no case to open an investigation" into E.ON’s marketing of its tariffs with Age UK.

But in a report also published by the Charity Commission today, the charity regulator says that although Age UK had processes in place to review the suitability of the products, the charity had not sufficiently considered the risks of targeting beneficiaries with a commercial product in an area in which it also campaigns on its beneficiaries’ behalf.

It also warns of the "significant risks" to charities participating in the energy market due to the "volatility and competition in the market and the tariff structure, which may be confusing to customers".

The report says that although the commission saw evidence that the ongoing suitability of the E.ON deal was reviewed, "the length of time between reviews were in our view insufficient given the level of inherent risk in such a commercial arrangement".

It concludes that the processes and considerations in monitoring and taking action in this area "have been insufficient".

The commission therefore recommends that Age UK ensures future commercial arrangements offer "sufficiently robust mechanisms" for maintaining the level of benefit a product provides, and have processes in place to monitor these deals and ensure "swift action in the event of a change of circumstances which might expose a risk to the charity".

The charity is also advised by the commission to ensure the definition of and difference between "best value" and "cheapest" are made clear on all product endorsements and that any commission or fees received by the charity are clearly identified.

The report says Age UK should conduct an immediate governance process review including the policies, procedures and agreements guiding and controlling trading subsidiaries and their use of the charity’s brand.

This review would set out how any conflict arising between raising revenue and furthering charitable purposes "will be managed to ensure there is no detrimental impact upon the charity’s brand, reputation and how it furthers its charitable work", the report says.

It says the governance process review should also ensure a "robust rolling review" of all products and ensuring the beneficiary class of Age UK is clearly set out in all policies and procedures.

David Holdsworth, chief operating officer at the Charity Commission, said: "Working with a company may bring many benefits for a charity including raising funds and increasing awareness of the cause. However, a charity’s name and reputation are valuable assets that trustees must protect.

"Participation in the energy market poses significant risks, and Age UK should consider whether continued involvement is in the charity’s best interests."

A spokeswoman for Age UK said the charity accepted that its trading arm needed a "sharper demarcation" from the charity.

"We want every customer of our trading arm to know who they have bought from, that any surplus is then gifted to our charity and how this then benefits older people in need," she said. "We will be making some changes so this is always crystal clear.

"We are glad that the benefits commercial partnerships can bring to charities and those they support have been recognised by the Charity Commission, and we hope the changes we will be making in response to this report will help other charities too."

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