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NZCU South is to pull its Credicare service, affecting about 2300 people and their families, many of whom had used it as a form of funeral cover.
The fund would close on July 30, because the scheme’s falling membership at the same time as an increase in payouts had made it unsustainable, the credit union’s, chief executive, Gavin Earle said.
He understood people over the age of 75 would not be able to get funeral cover.
"I absolutely understand why people are upset," Mr Earle said.
"But we’re doing the right thing by our membership."
NZCU South is part of a national merged operation, which has been holding meetings in the South Island this week, including in Dunedin and Invercargill.
One attendee at the Dunedin meeting was former Wakari Hospital nurse and Hillside worker Wayne White, who signed up to the scheme in 1994.
"We were led to believe this was going to cover us," Mr White (70) said.
"It’s like a kick in the guts.
"Our generation is getting thrown on the scrapheap."
John Cavanagh (73), of Milton, said he had been a member of the union for 40 years and he joined the bereavement fund as soon as it started.
"I won’t be able to get affordable cover," Mr Cavanagh said.
Mr Earle said members 73 and older had each been offered a one-off payment of $50.
This was labelled in an email to members as a gift, or "a small gesture of our appreciation of your support over the years".
"It’s the strangest gift I’ve ever had in my life," Mr Cavanagh said.
"I was paying for about 25 years and I get $50 back."
Mr Earle said he was conscious many people regarded the gesture as an insult.
The bereavement fund’s operation involved members allowing deductions from their savings to be made when other members died.
Family of the deceased would then receive a sum, lately $10,000.
However, Mr Earle said the average age of people contributing to the fund was rising and the ageing population was resulting in more payouts.
Some members had been offered alternative products, including a deal that would result in a funeral plan’s premiums being paid for three months.
Members said the premiums were much steeper.
Marj Still (75), of Dunedin, said she had paid into the fund for more than 25 years.
People at the Dunedin meeting were angry, Mrs Still said.
"For many people, that was their only cover."
Bill Boyes said his 89-year-old mother had made payments since 1994.
"This scheme has deprived people of funeral cover," Mr Boyes said.
Credit Union Baywide stopped a similar scheme in 2015 and merged with the southern union and others in 2019 and waited another two years before closing the fund, he said.
"They knew they had a liability going in and they didn’t make provision for it."
Mr Earle said while bereaved families had benefited from the scheme in the meantime, the focus had been on implementing the merger and a review of the bereavement fund resulted in the co-operative’s decision to close it.
Banking ombudsman Nicola Sladden said the office was aware of the closure.
"Whenever a product is discontinued by a financial service provider, there are concerns about what the change will mean for customers," she said.
"We can consider complaints about whether providers have breached their obligations, including treating customers fairly and reasonably.
"Clear, effective and timely communication is essential, so that customers can find out about their future options."
Mr White noted his 1994 deductions application form said his family was entitled to receive money from the fund "at the date of my death".
"They can’t get out of this."
Mr Earle said the co-operative’s board had the right to make the decision it had made.