Uma Ahmed
Members of New Zealand Credit Union South are upset at losing out on a funeral fund they have been paying into for years.
For decades, members of NZCU South had the option to sign up to a credicare fund that worked as a bereavement fund with a $5 joining fee.
Customers could nominate themselves or a family member to get access to a $10,000 payout for funeral costs when the nominee passed away.
A maximum of $4 was then taken out of the accounts linked to the credicare fund members to make up the $10,000 funeral payout. If the $10,000 figure was not reached, NZCU South subsidised the shortfall to $10,000.
However, the fund will cease on July 30, 2021.
Shirley Cranstoun has been a member of NZCU South for almost 20 years and has been paying claims for other members through her maximum $4 payments in hopes when her time comes, her family would not have to worry about funeral costs.
She was upset she and others had been helping to pay other people's funerals but when it was their turn they would get nothing [unless they died before July 30].
A public meeting was held about the closure of the fund at the NZ Credit Union in Invercargill on June 15.
NZCU Baywide chief executive officer Gavin Earle explained the reason for the fund’s closure to members, but many people at the meeting felt they had lost out after paying for others funerals for years.
He later said: “To be fair I always knew this news was going to come as a shock to some and a range of reactions ...”
About 2300 members were still in the scheme.
Earle said the decision to close the fund was partly because not enough people were signing up for it, but the number of claims were rising as more people died.
It was no longer feasible to make the $10, 000 funeral payments, he said.
The scheme was poorly designed when it was implemented many years ago and the regulatory environment has changed significantly in the last couple of years, he added.
“So compliance is a big part of all financial institutions and that’s why we’ve had to review that product ... in making sure it's fit for purpose.”
The longer the company allowed the credicare fund to continue, the lower the number of credicare members contributing their $4, and in turn the more the credit union had to subsidise the $10,000 payout, “which of course is unfair on all our membership,” Earle said.
The company’s legal advice was that the credit union board had the right to review the terms and conditions of any product or service, including closing down the credicare bereavement fund, Earle said.
He acknowledged many members of credicare felt disappointed by the removal of the credicare product.
“However, we have an obligation to do the right thing for all members.”
