Nominating someone to receive your credit union shares

If you save with a credit union, you can usually say who should receive your money if you die. Many credit unions ask you to name a nominee when you join, and at least one describes it as part of the membership process: "Upon joining the Credit Union you will nominate who you would like to leave your money to in the event of your death."¹ Others describe a nomination facility that lets you name who receives the property of your accounts.²

The person you name does not have to be a member. Membership depends on the common bond, the link such as where you live or work that lets someone join, and the nomination is a separate instruction about who gets the money.³ You can change the name later, and at least one credit union states you can change your beneficiary at any time.³

Two other things usually sit alongside a nomination. Most credit unions provide free life cover on savings and loans, so a payout can be made on death without the estate waiting.⁴ And your savings are protected by the Financial Services Compensation Scheme up to £120,000 per person per banking licence if the credit union fails.⁵

What you own as a credit union member: shares, votes and savings

A credit union is a group of people connected by a common bond, based on the area they live in, the occupation they work in, or the employer they work for, who save together and lend to each other.⁸ It is not-for-profit and run by members to benefit communities rather than to make a profit.⁹ The money you pay in is not a deposit in the ordinary bank sense: it is your shareholding.

That distinction matters for a nomination. South Manchester Credit Union puts it plainly: "Everything you save in your Dream Saver act as shares in your local credit union, you are a part owner!"¹⁰ The same wording applies to its open and locked savings accounts and its Christmas Club.¹¹ Because the balance is a shareholding, what passes on death is the property of your accounts, which is why credit unions use a nomination rather than a normal account instruction.²

Membership also carries rights. Each member holds a £1 share and gets one vote, no matter how much they have in savings, and each credit union has a volunteer board of directors.¹³ Any surplus funds generated are paid back to the members as a dividend.¹³ Credit unions are owned by their members, and Capital Credit Union describes itself simply as "owned by our members".¹⁴

In practice, the shares are your savings and the votes are your say in how the credit union is run. The nomination deals only with the first of those.

Dividends on your shares: usually paid once a year

Because you hold shares rather than a deposit, the return you get is a dividend, not interest. Credit unions normally pay a dividend once a year, and the amount depends on how much you have saved and how much profit the credit union has made.¹⁵ The Building Societies Association says the dividend on savings is usually paid annually.⁴

Individual credit unions describe the same pattern. Slemish n tha Braid Credit Union says: "Every year we may pay an attractive dividend on members savings."¹⁷ Kernow Credit Union pays dividends on its membership account annually, after the annual general meeting of the members.¹⁸ Stevenage Credit Union pays, when possible, an annual dividend to its members.¹⁹

Two points follow for anyone thinking about a nomination. First, a dividend that has been declared but not yet paid forms part of what you hold with the credit union, so it passes with the rest of your shares. Second, because the dividend is decided once a year and depends on the credit union's results, it is not a fixed rate and cannot be predicted in advance. The rate is set by the board and approved by members at the annual general meeting.

Free life cover on savings and loans at most credit unions

Most credit unions offer free life or loan protection insurance as part of membership.⁴ Enterprise Credit Union describes it as "Free protection on life savings and loans".²⁰ This cover is what makes a nomination work smoothly: instead of the money being frozen while an estate is sorted out, the credit union can pay a sum to the person you named.

The cover usually has two halves. Life savings insurance pays a multiple of your savings to your nominated beneficiary, and SaveEasy Credit Union states that payment goes "to the member's nominated beneficiary included in the membership application".²¹ Loan protection insurance deals with money you owe rather than money you hold, and is covered below.

Cover of this kind is provided by the credit union as a membership benefit rather than sold to you, so there is no premium to pay and no application to complete. The conditions, including any age limit and any cap on the payout, are set by each credit union and vary between them.

Does the person I nominate need to be a member?

No. The nomination is about who receives your money, not about who is allowed to join. Membership is governed by the common bond, which MoneyHelper describes as members sharing a link such as living, working, studying or volunteering in a certain area, working in the same industry or for certain employers, or belonging to the same trade union.⁹

That said, families often end up in the same credit union anyway, because most allow relatives at the same address to join. The Building Societies Association says that as long as one member of a family meets the common bond requirements and has joined, the other family members living at the same address can usually join.⁴ StepChange puts it as: "Anyone in the house of a person with a 'common bond' with a credit union can usually join."²²

Individual credit unions confirm the same rule in their own terms:

• Drumchapel Credit Union: relatives who live within the same household as a qualifying member are able to join.²³
• YourB Credit Union: an individual who is a member of the same household as, and is a relative of, a member and falls within the common bond.²⁴
• SCVO Credit Union: family members living at the same address as a member are also eligible.²⁵
• Capital Credit Union: you can join through an existing member's membership if you live in the same household.²⁶

If you want the person you nominate to be able to keep saving with the same credit union after your death, the household route is usually how they would join. There is more on this on can your family join too?.

What happens to your credit union loan if I die?

An outstanding loan does not simply disappear, but at many credit unions it is cleared. Muckamore Credit Union states: "Provided your loan repayments are up to date then on your death, your loan balance will be cleared and any shares you have will be paid straight to your beneficiary."⁷ Larne Credit Union says that should a member with an outstanding loan balance die, the balance is paid in full, with terms and conditions applying.²⁷

Capital Credit Union describes free loan protection insurance included with membership, up to a defined age, under which the outstanding balance may be repaid subject to eligibility criteria and policy terms.²⁸ The wording matters: "may be repaid" and "subject to eligibility criteria" mean the cover is not automatic in every case.

The practical step is to check your credit union's own terms rather than assume. There is more on this on loan protection insurance: when a loan is cleared on death and on what happens to savings and loans when a member dies.

How do I find out whether my credit union offers nominations?

Ask the credit union. Nominations are a feature of membership rather than a product, so they appear in membership terms and joining paperwork rather than in advertising. Teachers' Credit Union describes the facility in its account information: "Credit unions have a nomination facility whereby you can nominate who is to receive the property of your accounts with the credit union upon their death."²

When you joined, you may have been asked for a name on the application form. SaveEasy Credit Union refers to the nominated beneficiary being included in the membership application.²¹ Muckamore Credit Union says you will be asked to nominate a beneficiary, the person you want your money paid to when you die, and can change the name at any time.³

If you cannot find the paperwork, the credit union's own staff can confirm what is on your record. Credit unions are small enough that this is usually a phone call or a visit rather than a formal process. If you are not yet a member, the joining process is set out on how to join a credit union: ID, fees and minimum balances, and you can find one you are eligible for on finding a credit union you can join.

Changing your nomination

A nomination that no longer reflects what you want can be replaced. Muckamore Credit Union states that you can change the name of your beneficiary at any time.³ The practical step is to tell the credit union in writing so the membership record is updated, and to keep a copy of what you sent.

It is worth reviewing the name you have given after any major change: a marriage, a separation, a birth, or the death of the person you originally named. A nomination naming someone who has died, or someone you are no longer in contact with, still stands until it is changed.

FSCS protection: up to £120,000 per person

Credit union deposits are covered by the Financial Services Compensation Scheme. The scheme states that it protects up to £120,000 in total across all accounts you hold with the credit union, per person.⁵ It also confirms that protection is up to £120,000 per person per banking licence for banks, building societies and credit unions.⁶ The scheme can pay back money held with a failed credit union up to its compensation limit of £120,000 per person.⁵

Two details matter. The limit is per person, not per account, so several accounts with the same credit union count together towards one £120,000 figure.⁵ And it is per banking licence, so where two brands share a licence, money in both counts together.⁶ The scheme's own guidance confirms the £120,000 figure applies to all banks, building societies and credit unions authorised by the Prudential Regulation Authority and the Financial Conduct Authority.²⁹

Some credit unions describe the protection in their own terms. Capital Credit Union states it is a member of the Financial Services Compensation Scheme, which provides a safety net if a bank, building society or credit union should fail.³⁰ The Welsh Government's guidance confirms that loans and savings are protected by the scheme.³¹

If a credit union fails, the scheme handles claims directly and there is no cost to the customer. The scheme's own pages explain how to check whether a firm is covered and how to make a claim.²⁹

Where to get help

Credit unions are covered by the Financial Ombudsman Service for complaints, and each credit union must nominate a member of the board or an employee to be responsible for complaints, notifying the Financial Conduct Authority of that person's name and of any change on the next quarterly return.³² That means there is a named route inside the credit union before a complaint goes further.

Free and impartial help is available from MoneyHelper for questions about credit union accounts and how they work.⁹ For anyone struggling with borrowing, StepChange provides free debt information including on credit unions.²² Gambling-related money problems have a dedicated signpost through the credit union sector's own help page.³²

If you are dealing with a credit union loan you cannot repay, the options are set out on falling behind on a credit union loan. For the wider picture on what credit unions offer, see what credit unions offer: savings, loans, current accounts and more.