Credit union launches for civil servants

The Department for Work and Pensions (DWP), one of central government’s largest departments, has launched a credit union for staff – the first credit union scheme for civil...

The Department for Work and Pensions (DWP), one of central government’s largest departments, has launched a credit union for staff – the first credit union scheme for civil servants. Around 85,000 DWP employees will now be able to start automatically saving part of their salary into a credit union savings scheme.

DWP has set up a payroll scheme with three of the UK’s leading credit unions – Commsave, Hull & East Yorkshire and Voyager Alliance – which will offer a range of ethical financial services to all DWP employees, including budget support and responsible lending.

The move was announced in a speech to the credit union sector in parliament by welfare reform minister, Lord David Freud, who pledged his support for credit unions and encouraged people to join their local credit union to help the industry grow.

Credit unions: The mystery of the disappearing members

“Everyone should be able to access good quality and affordable financial services and that’s why I am a firm supporter of credit unions,” said Lord Freud, who is a member of the London Mutual Credit Union.

Lord David Freud
Lord David Freud

“I’d urge people to consider joining their local credit union. Credit unions need us to be their customers, so they can grow and continue to serve their local community. I’m proud we as an employer are making it really easy for our staff to join one.”

The government has invested £38m into the credit union industry to help it modernise, expand and become financially self-sustainable. In the 12 months to December 2015, credit union membership grew by an average of 5.7%.

Last year credit unions linked up to offer direct services to members of the armed forces and their families, and in May, Hoot Credit Union, the 1st Class Credit Union and the NHS Credit Union gained five-star status from the Fairbanking Foundation.

Mark Lyonette, chief executive of the Association of British Credit Unions (Abcul), said: “It’s no coincidence that the most successful credit union sectors across the world have developed close links with employers so that saving and repaying affordable loans can be done direct from payroll.

“Easy access to credit union services isn’t just good news for employees. Research has shown that money worries lead to increased absence and lower productivity, so helping staff save and borrow responsibly is good for business. We’re delighted that the DWP is setting an example for other public, private and third sector employers to follow.”

Finding new markets to expand the credit union movement

The Co-operative Party has also been vocal in its support of credit unions. Co-operative Party MPs Gareth Thomas and Chris Evans have called on treasury minister Harriet Baldwin to increase efforts towards the expansion of financial mutuals.

Gareth Thomas
Gareth Thomas

The MPs cited poor communities as particularly abandoned by traditional banks, with financial mutuals such as credit unions well placed to serve them.

For example, residents of a Thamesmead estate of 50,000 homes in south London currently face a 40 minute drive to their nearest bank.

Gareth Thomas said this was a clear sign that support for the credit union couldn’t wait. He said: “This trend is towards bank branch closures, and we tend to see that more in areas of deprivation and of the greatest need. Given that in these areas people often face high interest rate alternatives […] we should hear more from the government about how they intend to create more responsible finance.”

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