Savings Cap Questions & Answers
Why are you limiting/imposing a savings cap?
The Board of TUI credit union have taken the difficult decision to limit savings to €30,000 per member account after a significant increase in the number of cash deposits made at the credit union and the knock-on implication this has had on the credit union’s overall reserve position.
This means that for every additional €100,000 of savings, we must allocate €10,000 from our surplus / profits to our Capital Reserve, and this can have the effect of depleting the amount available to pay a dividend at year end and roll our new services e.g further IT advancements.
We also face the challenge of a low interest rate environment which is greatly reducing the investment income that TUI Credit Union earns on its deposits. The credit union must maintain sufficient short-term deposits to meet its liquidity requirements. Currently the credit union is being charged negative interest rates on these investments having the effect that we are now being charged for these investments which further reduces our surplus. All this means, the low interest rate environment which currently exists has a significant impact on our ability to generate a surplus.
How many members will this affect?
This will affect approx. 295 member accounts in total which is only 4.5% of total membership.
What is the saving restriction? The credit union now has a saving restriction of €30,000 per member account. This means that each member can only have €30,000 on deposit with the credit union. If anyone currently has over that amount in savings they do not have to withdraw them but will not be allowed add additional funds. Members who have less than €30,000 can increase their shares to €30,000 – but no more than that.
What about members with savings under €30,000?
If the member has less than €30,000 they are free to increase it to this amount, but to no more beyond this level.
What about members with savings above €30,000?
Members above €30,000 are not required to withdraw funds to comply with this cap. Members in this category cannot make lodgements to their accounts until the balance goes below €30,000.
How long will the cap last for?
The Board of TUI credit union will keep the savings restriction under constant review, if they make any decision to change the current cap, members will be informed.
Does this mean the credit union is in difficulty?
No, this has no bearing on the day to day operations of the credit union. TUI credit union is adequately capitalised at €8m and has assets of €52m. Savings currently stand at €44m having increased by 5.6% to February 2021 following a 14% increase the previous year to September 2020.
Each time our savings increase, we must allocate more money from our surplus funds to meet our regulatory reserve, therefore reducing the amount we have available to pay out a dividend or loan interest rebate. It also reduces the amount we can afford to invest in new services and new technology options that can benefit all our members.
To reduce the impact of this savings growth, the decision was reluctantly taken to limit savings to benefit the greater number of our members.
Are my savings safe here?
I can assure you that your savings remain safe and secure at TUI Credit Union. We are a financially strong and stable credit union with €8m (15.5%) in capital reserves and €52m in assets. In 2020 our Loan Book grew by 16% the fourth highest loan growth for any affiliated credit union within the Irish League of Credit Unions. We also reported a surplus of €700,439 for the year. In addition, your savings continue to be guaranteed by the Government Deposit Guarantee Scheme up to €100,000.
Please take note of your current balance and ensure that it does not exceed the €30,000 limit on savings. You may find out your current savings balance by contacting the credit union directly or by registering for online banking.