The Department for Work and Pensions has launched a new credit union savings scheme for staff, as part of the government's drive to boost the ethical finance industry.
Credit unions are non-profit making, member-owned financial insitutions – often small in size – which aim to encourage saving and offer credit at more reasonable rates than high-street and payday lenders.
The DWP invested £38m with the Association of British Credit Unions (ABCUL) last year in a bid to make the industry financially self-sufficient and encourage a million more people to join credit unions by 2019.
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Welfare reform minister Lord Freud confirmed on Wednesday that the DWP, one of the largest government departments, had now launched its own credit union payroll savings scheme for its 85,000 staff, allowing them to automatically set aside part of their pay packet and put it in a credit union.
“Everyone should be able to access good quality and affordable financial services and that’s why I am a firm supporter of credit unions," Freud said. “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.”
ABCUL's chief executive Mark Lyonette said his organisation was "delighted that the DWP is setting an example for other public, private and third sector employers to follow".
He added: "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."
According to a recent briefing by the House of Commons library, attempts to expand the credit union sector – still a relative newcomer to the UK's financial services scene – have had a patchy history.
"Successive governments’ policies have encouraged the growth of credit unions, both in terms of their national coverage and the services they can offer," the briefing says.
"This pressure to get bigger and to do more has in turn put pressure on the traditional organisation structure. The development of a more professional service is unlikely to be predicated on an army of community volunteers. Broadening their reach without at the same time loosening their local ties and bonds is a difficult balancing act."