Bereavement fund closure like ‘kick in the guts’

Wayne White and Marj Still are unimpressed that a credit union’s bereavement fund is to close....
Wayne White and Marj Still are unimpressed that a credit union’s bereavement fund is to close. PHOTO: GREGOR RICHARDSON
Elderly people who contributed to a bereavement fund for decades will be left in the lurch.

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.


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This sounds a big bit like a Ponzi scheme to me, if its not then its sounds a bit dodgy to me. This needs investigating

I have been a Credit Union member so long my member number only has four numbers. In those days their moto was "People before profit" since dropped. I have tried to encourage the board to attract more members by offering loans at a lower rate but they seem to think it is a bank now. I joined the fund in its infancy at that time when you would contribute $10 each when another needed it. Seems in their wisdom they made it a garmented $10,000 now! I knew I should have died earlier. Now they say they cant sustain it? Idiocy. Our Union has been merged with a larger organisation now I wonder if that is where the new direction is coming from.

It's not even remotely close to a Ponzi scheme - I'm sure it feels rude that they're ending it, and it won't sit right for those people who have contributed for years, but it's essentially crowdfunded funeral insurance; by being part of it, these people were agreeing to contribute to the funerals of others, with the assumption that the fund would remain open to cover them if they passed away. There was a "people helping people" ideology driving this scheme - it's not fraud as you suggest. It is, however, sad for those people who have contributed towards others' funerals over the years and won't be able to receive the same benefit now it's winding up.

It's not even remotely close to a Ponzi scheme? Well according to the results of a Google search I believe it surely is---

"Companies that engage in a Ponzi scheme focus all of their energy into attracting new clients to make investments. This new income is used to pay original investors their returns". (Google Search)

But then I suppose it is whether you are on the receiving end of the scheme or the losing end of the scheme...

“Companies that engage in a Ponzi scheme focus all of their energy into attracting new clients to make investments. This new income is used to pay original investors their returns". (Google Search)

There’s no investment, only small, occasional deductions that went directly to families; no money was ever held by the credit union with the intention of a return - no investment pool, no expectation of return (only reciprocation), therefore no Ponzi scheme. I paid into this scheme for many years, as younger person - it wasn’t expensive, was great when families were able to have a funeral they otherwise couldn’t afford, and when I left the credit union, I didn’t cry because I’d contributed and didn’t get a payout - because I knew that product wasn’t a funeral plan, but a crowdfunded bereavement scheme.

This is very interesting, but I have no sense of scale. I have two questions.

Question 1: If you have been in this scheme since 1994, can you please tell us how much you contributed to other peoples' funerals *in total* over this time period?

Question 2: If you have been in this scheme during calendar year 2020, can you tell us how much you contributed to other peoples' funerals *during 2020*?

The scheme probably made sense when interest rates were high, but, like Bonus Bonds, it has been deemed non-viable under the low interest rate regime.

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