People living in London and around the UK now have a cautious sense of optimism that we may be past the worst of the Covid-19.
Two years since the pandemic began, however, the changes facing UK households and companies have caused significant pressure. For many community groups, particularly credit unions, these have been felt acutely.
The board and management of LCCU have taken several steps including cutting costs, seeking to renegotiate contracts and increase income in order to ensure the organisation is viable.
Management also utilised the government’s furlough scheme and reduced staff headcount. Several members of senior management also took a voluntary pay cut in 2020.
At the same time we have taken action steps to support members, including the offer of a reduced rate of interest on loans during the first lockdown and loan repayment deferrals.
We have also invested in our telephone support and online service to respond to the increase in demand for these services.
Financial impact of Covid-19 on the credit union
Over the last year the number of loan approvals has increased gradually following a decline amid the first lockdown in 2019/20. The credit union’s loan interest income has also dropped for a range of reasons. Revenue has fallen below that projected in our financial plan.
At the same time we carry a large deposit base and this has evened out a little over 2020/21 following the re-opening of society and as pressure on household budgets leads residents to access their savings periodically. We encourage members to save regularly but very high deposits create a challenge for us because we are required to hold additional reserves against them.
Now, as part of measures to ensure regulatory compliance, we are required to increase the amount of capital we hold in reserve. To help achieve this, we are continuing two policies which affect adult members.
A membership levy of £10.
This levy will be charged on 3 May 2022 on all active adult members with a SaverPlus balance of £100 or greater as of 30 April 2021.
Although this charge puts us in line with other credit unions, it is only taken with reluctance. We are mindful of the impact any such charge can have on our most financially vulnerable members. Members with saving below £100 will be excluded.
A temporary £30k cap on member saving deposits.
The temporary cap on savings deposits applied from March last year and, following regular review, we can confirm fewer than 0.1 per cent of members are affected.
The ceiling on deposits also puts us in line with many other credit unions.
Members who hold deposits above £30,000 have been contacted and advised of the charge. If we do not hold up to date contact details then please get in touch to inform us of the changes.
Although more than 99.9 per cent of members will be unaffected by this change, we understand that some will hold large deposits out of a desire to support the credit union’s work in the alleviation of poverty.
Alongside our other plans to boost income and control costs, we are confident these changes will deliver a strong and sustainable credit union.
The credit union was set up in Tower Hamlets in 2000. Now, following our 20th anniversary, we want to work with members to ensure another 20 years of improving financial resilience and supporting the alleviation of poverty in east London. Thank you for your support.