Following due consideration and deliberation, the Board of Directors of Lurgan Credit Union Limited has taken the decision to introduce a cap of £20,000 on total combined savings (i.e. money held in your share, easy share or social account), effective as of 1 October 2017. This decision was taken in the best interest of all members of the credit union.
With a member’s savings, on average, of £2,750, which falls well below the new limit, the vast majority of our membership will remain unaffected by these changes.
All members will have received written communication on this matter, with sufficient notice provided to allow for those directly impacted by this decision (less than 3% of members) to make the necessary arrangements to bring their account balance to within the new limit of £20,000.
The rationale behind introducing the new savings cap is as follows:
In recent years, Lurgan Credit Union has experienced significant yearly increases in overall savings held by members whilst our loan book is growing at a slower rate. We, of course, welcome this display of confidence in the credit union’s financial strength and stability, however, too large an imbalance between growth in savings and loan growth can have potential downsides.
- The Board of Directors has a responsibility to ensure the most productive use of the Credit Union’s funds – in the form of members’ savings – to generate income that will allow us to maximise benefits for all our members, cover running costs, etc. Our primary income is from loans to borrowers so, when savings held are far in excess of the sum required to service loans and other costs, this excess must be invested elsewhere. Regulations require that investments we make are secure and have easy liquidity. After taxation, such investments attract a very low rate of return in the current financial climate.
- Moreover, these excess savings also have an impact on the rate of dividend that can be made available to members. Whatever the amount of end-of-year surplus available for distribution as dividend, every pound of member savings, including the excess savings mentioned above, must attract an equal share. This means that the surplus is being spread very thinly and the scope for possibly increasing the percentage rate of dividend is greatly reduced.
- Also, financial regulations require that we maintain reserves of at least 10% of our assets. These reserves are also taken from our yearly surplus. By holding unnecessarily high levels of members’ savings we would therefore increase the amount taken from surplus and further reduce the amount available for distribution to members in the form of dividend or rebate on loan interest.
Thank you for your understanding in this matter.
If at any stage you require assistance or have any questions, please do not hesitate to contact a member of management at Lurgan Credit Union.