Energy regulator Ofgem says it is looking into claims energy firm E.on paid £6 million a year to Age UK in return for the charity pushing expensive tariffs to the elderly.

Energy secretary Amber Rudd said she was taking the allegation in today's Sun newspaper that UK pensioners have been misled "very seriously", and has asked Ofgem to investigate the claims, while the Charity Commission is also looking at "any action that might be necessary".

But Age UK has rejected the claims that the charity has been promoting expensive tariffs, and E.on says its tariffs were competitively priced.

The Sun reports it found details of E.on's payments to Age UK – which it says were not illegal – in the charity's annual accounts, and said they totalled at least £6 million in a year. It claims the charity had been recommending a special E.on tariff in leaflets and booklets, stating it was "great value" and "helps save energy and money".

Update Tuesday 9 Feb: E.on and Age UK have announced that from 10 February they will temporarily stop offering the tariff, citing "continued speculation regarding the partnership".

How do the E.on/Age UK tariffs stack up?

We've crunched the numbers to look at how Age UK's two most recent tariffs stacked up when they were launched. Importantly, we've compared Age UK's tariffs, which were two-year fixed deals, with other two-year fixed deals, rather than just the cheapest deal of any length on the market.

E.on launched its 'Age UK Fixed 2 Year v5 Online' tariff on 24 February 2015 and its 'Age UK Fixed 2 Year v6 Online' tariff on 20 January 2016.

HOW THE TARIFFS COMPARE
(Average annual price on Ofgem typical dual fuel use)

Tariff 24 February 2015 (1) 20 January 2016 (2)
E.on/Age UK tariff (two-year fix) £1,102 £939
Cheapest two-year fix on the market £993 (from Green Star) £939 (the same E.on deal)
Cheapest deal from E.on (one-year fix) £1,101 £783
E.on's standard tariff £1,135 £1,079
Cheapest overall deal on the market £918 (from Scottish Power) £775 (from SSE)
Note: Ofgem's definition of 'typical use' changed over this period, so 2015 figures cannot be compared with 2016. (1) Ofgem typical use defined as 3,200kWh of electricity and 13,500kWH of gas. (2) Ofgem typical use defined as 3,100kWh of electricity and 12,500kWH of gas.

'Age UK should look at helping users get the best deals across the market'

Martin Lewis, founder of MoneySavingExpert.com, says: "Elderly people who believe a charity is there to help them should have expected a better deal than they got from Age UK. It's not a rip-off as it was at least cheaper than standard tariffs, but nor is it close to one of the market's cheapest deals, which you would want from a champion of the elderly. In February 2015 its tariff when launched was better than anything that its partner E.on was offering but wasn't close to the market's leading two-year fix.

"The real problem was when the price of cheap switchers' tariffs dropped, Age UK kept its price high for almost a year – that meant until it reviewed it, it really wasn't a good deal. Whether that was due to taking its eye off the ball or just keeping it running without checking, or doing it deliberately to boost revenues, is open to question.

"It's worth analysing that this tariff was a two-year fix; inherently they are more expensive than one-year deals, but with the benefit that you need to act less often. One defence Age UK could argue is for the many who go on short fixes then don't switch when they end and pay much higher rates, this was a suitable tariff. Indeed I'd support that argument, if only it had always ensured this was a cheap two-year fix.

"What Age UK should consider doing is instead of putting its brand to a tariff, it should look at how it can help its users get the best deals across the market and hold their hands through that process – linking with a whole-of-market comparison site that does a revenue share with it could accomplish this and generate it money.

"Ultimately this is all caused by one simple problem. Age UK is a great charity that helps many elderly people – but this tariff was organised by its commercial arm, whose job is to generate the charity cash to operate. The fact they share a brand risks confusion and makes people think its energy deal was part of its charitable actions, not a revenue raiser. It's not the only charity that does this. Good practice would see clear brand-distinction between charities and their commercial arms."

To be sure you're getting the best energy deal, make sure you always do a full comparison – you can use our Cheap Energy Club. See more on how to cut energy costs in our Cheap Gas and Electricity guide.

Martin Lewis
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What E.on says

An E.on spokesperson says: "Our current Age UK tariff was the cheapest product of its type in Britain when it was launched, a two-year fixed deal, and when we launched our current one-year fixed product, it was also the cheapest in Britain.

"Any of our customers can switch to any of these products at any time, based on the suitability of their meter, without any charge being applied. If a customer is on a fixed tariff and they opt in for a price alert, and if we issue a new tariff that is cheaper, we will automatically notify them of that. But in line with Ofgem's rules we can't switch people without their consent."

E.on confirmed there was a "commercial relationship" between it and the charity but declined to comment on the "sensitive" nature of the amount paid to Age UK.

What Age UK says

In January Age UK criticised the big six energy firms for overcharging and warned that more than 4.1 million older people were "anxious" about high heating costs.

An Age UK spokesperson rejects allegations the charity has been pushing expensive tariffs and also the "interpretation of the figures".

He says: "Age UK has worked with E.on for the past 14 years, openly and above board, and they have been generous supporters of our charity over and above the number of customers on the tariff.

"We launched the most competitive fixed two-year energy tariff available anywhere on the market on 20 January this year, with no exit fees. Energy prices change all the time and we have always advised older people to look out for new good deals and will continue to do so."

Asked to confirm how much E.on paid Age UK last year, an Age UK spokesperson told MoneySavingExpert: "Financial support varies from year to year and is not solely linked to customer numbers. The long-term commercial partnership includes a typical commission to Age UK Enterprises of £10 for each customer.

"The past two years have seen much volatility in the energy market and with E.on's support we have managed to maintain our level of charitable work over this time."

Ofgem and Charity Commission investigating

An Ofgem spokesperson says: "Ofgem rules require energy companies to treat consumers fairly when they are marketing and selling energy. Ofgem has a track record of punishing firms who mislead consumers and we will look carefully at these claims.

"The timeframe for this investigation is that it will take as long as is necessary."

A Charity Commission spokesperson says: "The commission is aware of concerns raised in the media regarding Age UK's partnership activities with E.on.

"The commission is in contact with both Age UK and Ofgem to determine what regulatory role the commission might have and any action that might be necessary."

Additional reporting by the Press Association.

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