UK workers could save £250 million a year if payroll loans replaced high-cost credit

04 July 2018

UK workers could save more than £250 million a year in interest rate charges if companies introduced a payroll loan scheme like the Co-op.

By providing colleagues with the ability to repay loans direct from their salaries, the Co-op is able to offer a practical alternative to high cost forms of borrowing, which can adversely impact on the lives of individuals and their families.

Financial Wellbeing Company Neyber, which has been introduced alongside the Co-op’s two Credit Unions, offers loans that have a typical rate of 7.9% APR for which more than half of Co-op colleagues qualify.

Because repayments are paid direct from salaries, the Co-op’s colleague loans provided by Neyber and by the Co-op Credit Union and the Value Credit Union offer competitive rates of interest.

Neyber provides education, saving and borrowing products which can be used to purchase big ticket goods such as cars or holidays, or consolidate outstanding debt, which is what the majority of Co-op colleagues have done when taking out a loan.

As personal debt continues to rise it is estimated that around 300,000 people a month take out high-cost short-term credit. At the end of 2016, 1.6 million people had high cost credit debt, with the average loan just over £300. Around one in eight of the borrowers were in arrears, according to the Financial Conduct Authority.

If that interest was only 7.9% APR instead of the current capped high cost credit loan rate of £24 per £100 borrowed for 30 days, then UK workers could save a total of £252 million per year.

The Neyber financial wellbeing benefit is the latest employee benefit offered to Co-op colleagues.

Helen Webb, Chief People Officer at the Co-op, said: “We wanted to offer colleagues more practical alternatives to high cost borrowing as we are aware that some colleagues have personal debt issues that can lead to stress and impact on home and working life.

“Because the loans are paid directly from salaries they are almost certainly at a lower interest rate than colleagues would pay on loans from other lenders.

“That is why we have partnered with Neyber to provide more help for colleagues who want to consolidate their debts. Neyber will work alongside Value Credit Union and Co-operative Credit Union which have been offering savings and loan accounts to Co-op colleagues for 30 and 20 years respectively.

“The Co-op is founded on a set of values and principles describing a different, fairer and better way of doing business and that relates as much to our colleagues as to our members and customers.

“We know our extensive range of benefits are really appreciated by colleagues and are an important part of the overall package which makes the Co-op a very special place to work. That is why we put so much work into offering a total benefits package that in many cases is better than anything offered by our rivals.”

Other benefits the Co-op offers colleagues include: discounts at its food, Funeralcare, legal, beds and electrical businesses; interest free loans to cover the deposit on a rented property; interest free season ticket loans; and a scheme which offers tax benefits when buying a new bike plus 20 per cent off membership at Nuffield fitness centres.

Health and well-being benefits include a confidential employee assistance programme provided by lifeworks, with support and counselling available 24/7 365 days a year; health assessment and death in service and personal accident cover, as well as pensions.

Statistics and sources

Around 300,000 people a month take out high-cost short-term credit. At the end of 2016, 1.6 million people had payday loan debt, with the average loan just over £300. Around one in eight of the debtors was in arrears, according to the Financial Conduct Authority.

FCA rules state that someone taking out a loan for 30 days will pay no more than £24 in fees and charges per £100 borrowed.

At FCA cap, this £300 average payday loan will cost £72 in interest.

The typical rate offered by Neyber (7.9%) equates to a daily percentage rate of 0.022%

This same £300 would therefore cost £1.95 in interest. A saving of £70.05

Annual worker savings if borrowed as payroll loan rather than payday loan = 12 months * 300,000 loans * £70.05 saved. = £252.2 million

Notes / assumptions.

Note that this calculation assumes borrowing over a comparable amount (£300) over a comparable 30 day period, whilst the typical payroll loan is a larger value and longer-term finance product.

About Neyber

Neyber is a multi-award-winning financial wellbeing provider that helps UK employees to be better with their money. It partners with employers to support their workforce’s financial wellbeing with access to affordable, salary-deducted loans, financial education insights and a range of savings and investment products – all at no cost or risk to the employer.

Its vision is to build a community of employees who can confidently deal with money and have access to fairer finance when they need it.

Neyber has been included in KPMG’s 2017 global list of the top 100 fintech companies, recognised as Ethical Financial Services Provider of the Year at the Money Age Awards and became the first alternative lender to be accredited by the Lending Standards Board. It has been recognised as one of the top 50 most disruptive companies in the UK by Real Business and won “Benefits Innovation of the Year”, at the Workplace Savings and Benefits Awards in both 2016 and 2017. Neyber is also the Financial Wellbeing provider to the winner of the Employee Benefits Awards’ “Best Financial Wellbeing Strategy”.

Neyber was founded by former Goldman Sachs investment bankers Martin ljaha and Monica Kalia along with financial technology expert Ezechi Britton. The founders joined together to deliver a genuine alternative to the solutions offered by financial service providers whose high borrowing rates and low returns on savings have helped to create an unprecedented era of financial stress. Clients include the UK Police Service, London City Airport, Anglian Water, NHS Trusts and FTSE listed firms.

Dave Smith
Corporate PR Manager Communications
Tel: 0161 692 4285
Mobile: 07702152771