Why save or borrow through a payroll deduction scheme?
If you work in the public sector in Wales then the chances are you’re eligible to save or borrow with a credit union as a perk of your employment.
There are 140 organisations in Wales that have become payroll partners with their nearest credit union and the majority of them include local authorities, health boards and housing associations.
Employers recognise that supporting the financial well-being of their staff is good for them, good for the community, but also good for business too because financially secure staff are less like to suffer stress and mental illness – which causes absenteeism.
This is particularly the case today as household debt has reached a new high. According to the TUC, UK households now owe an average of £15,385 to credit card firms, banks and other lenders.
Many of us are losing the savings habit. Previously we would save for a rainy day ahead, but for many people the rainy day is now.
As financial cooperatives credit unions promote the habit of saving as a way of securing a firm financial foundation for its members who also have a say in how the organisation is managed and run.
By putting aside even the smallest amount of money the saving pot can soon mount up and help towards a special event like Christmas or a special holiday. It can also offer a secure buffer against any unexpected bills, including a failed MoT or a broken down cooker.
A benefit of payroll deduction is that a nominal sum is taken from an employer’s wage and placed into a savings account or used to pay off a loan before they can miss – or spend it.
Those savings also benefit the local community because they are used to provide low-cost, affordable loans to others. Rather than profit going to shareholders as they would with high street banks, this is usually paid as dividends to all credit union members.
Credit unions are governed by the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) so savings are protected up to £85,000.
Credit unions don’t believe credit is a bad thing, as long as its affordable and manageable for the borrower. As more people fall prey to payday lenders and loan sharks, credit unions want their members to realise that they will be treated as individuals, not as a credit score.
We all need to borrow money from time to time which is why employees of a credit union payroll partner can access affordable loans as part of their benefits package, which is repaid from salary deductions.
Workplace loans can help develop savings habits because once the loan is repaid, staff get used to a nominal sum being placed into a savings account instead.
Credit unions not offer very competitive rates of interest on personal loans but interest is charged on the reducing balance of the loan.
They also come with no hidden charges and no penalties for repaying the loan early and include free life insurance at no extra cost.
So find out if your employer is a credit union payroll partner and take advantage of the many financial products available to you as a member of the workforce.