YOUR VIEWS SOUGHT
YOUR VIEWS SOUGHT.
THE CASE FOR A CREDIT UNION FOR RBL MEMBERS? by A L PARRINI
Evidenced by the partnership between TRBL, the RAFBF and the Citizens Advice Bureau to provide Money and Benefits Advice to serving and ex-service personnel, there would appear to be an urgent need to reduce the growing number of welfare cases involving debt. Indeed in one CAB document is recorded, 46 percent of 681 clients advised in a six month period involved debt.
There has been year on year growth in the amount of debt TRBL is paying off on behalf of beneficiaries: in the last financial year the total amount of funds spent on this was over £1,630,000. The 3 year partnership programme with the CAB, is costing over £2,340,000. A recent study has indicated that the cost of creating a credit union for the RBL beneficiary group should be under £1m over a 6 year period. Therefore the establishment of a credit union would be a very cost effective means of providing financial assistance to our beneficiary group and one that can only grow over time in terms of size and effectiveness.
To quote directly from the Annual Report 2008:-
“Whilst the majority of immediate needs grants are made through the Legion’s structure of staff and volunteers, the Legion is increasingly widening its service response by establishing partnerships and providing grants to others. Partnerships have been established with the Citizens Advice Bureau to provide a dedicated Benefits and Money Advice Service and home improvement organizations to assist in providing low level home and garden maintenance to beneficiaries. In 2008 these partnerships cost £1.2 million (2007: £544k) of which Benefit & debt services cost £1.138m”
Many of the problems stem from irresponsible lending, the availability of doorstep credit and the desire for unaffordable luxury items in our materialistic age. To resolve the problem of debt counselling, additional casework and reducing membership, the introduction of a Royal British Legion Credit Union (RBLCU) would go a long way to resolving the debt problem amongst serving and ex-service personnel.
Credit Unions are non-profit financial cooperatives regulated by the Financial Services Authority. They offer savings products and affordable loans. There needs to be a common bond amongst the members of a Credit Union such as members of the same Association.
For example, serving personnel would be invited to make payroll contributions to their Credit Union Account for a minimum of 12 months at £50-00 or more per month. From the first month’s contribution, they would agree to pay the annual subscription and become members of TRBL. Thus, in parallel with reducing long term welfare costs, TRBL could potentially recruit every member of the Armed Forces for as long as they wished to use and benefit from the RBLCU.
Once a member has proved the capability to save regularly, they would be able to withdraw their savings and take loans at minimal interest rates. The process would continue for as long as they wished, but on a 12 month renewable basis and continued membership of TRBL. On leaving the Services, a member could remain with the Credit Union provided they remained members of TRBL Existing members of TRBL and other ex-service personnel and their dependents would also be able to join the RBLCU provided they join TRBL and remain members.
One existing Credit Union provides the following benefits:
a. Free Life Assurance - the nominated beneficiary receives the member's shares plus half the amount again and any CU debt is cleared.
b. Access to low cost borrowing - interest is charged at 1% pcm on the reducing balance of the loan (12.68% apr). Members have to save regularly for 13 weeks before a loan can be applied for (however, I believe plans are in place to alter this arrangement, but I don't have the details i.e. someone might not have to have saved for 13 weeks before a loan application). Specifically, for example, someone can borrow £1000 over 12 months and only repay £1055.58.
c. Dividends - CU paid members a 2.5% dividend on last year's savings
If 50,000 saved £50 per month with the RBLCU, assets could reach £30million within 12 months. The investment potential to provide reduced interest on loans made by the RBLCU would be enormous. Of course there are set-up, staffing and office costs to be considered; however, all Credit Unions carry this requirement and operate successfully. In addition, the constitution of the RBLCU could include annual percentage payments to nominated charities from profits accrued. Even if this was a quarter of one percent, a considerable amount could be raised for the Poppy Appeal each year subject recommendation of the Trustees and the agreement of the AGM of RBLCU.
If prevention of debt is better than having to cure it, then surely TRBL should take the lead, determine the mechanics of a Credit Union, undertake an urgent feasibility study with the MOD’s Pay Agents and establish a Credit Union as soon as possible.
TRBL has objectives and strategies that include increasing membership, reducing debt, increasing financial awareness amongst serving and ex-service personnel to drive down welfare costs. If an RBLCU were to be established, in the long term, casework and debt counselling would reduce, personnel would have access to affordable lending and learn something about financial responsibility. At the same time the membership potential woud be enormous.
I would welcome the views of TRBL Members, members of the Armed Forces past and present and anyone associated with the welfare of the military family.
Tony Parrini
A L PARRINI, MBE
Branch Secretary
TRBL Carlisle and Stanwix Branch
tony@parrini.co.uk
