At Legal & General, we want to help individuals have a happy and healthy financial future. From saving for a rainy day and better budgeting to getting out of payday loan cycles, a sustainable financial future means a better quality of life for individuals and their families.
That’s why in 2017 we invested £9.9 million for a stake of more than 40% in Salary Finance, a digital financial start-up that was working with businesses to help employees improve their financial wellbeing. Since then, further amounts have been invested by us and other leading backers, and today the company helps 3 million individuals from over 550 companies in the UK, 15% of which are in the FTSE 100.
The premise behind Salary Finance arose as a response to a deep-rooted societal problem: the less you earn, the lower your credit score and the higher rate of interest required. “There really is no other service in the world that has that dynamic,” explains Asesh Sarkar, Co-Founder and Global CEO of Salary Finance. “It’s like going into a sandwich shop and being told either: ‘You’re really rich so we’ll charge you £1 for a sandwich’ or ‘You’re young or really poor so we’re going to charge you £10’. It’s highly regressive and creates a huge wealth gap.”
By partnering with employers and linking to their payroll, Salary Finance helps to reduce employees’ financial risk, supporting them in the management of any debt and the building of savings. Employees’ daily earnings are also calculated to allow on-demand access to earned income throughout the month, salary-linked savings accounts allow employees to save without even thinking about it and a unique partnership with HMRC means those receiving Working Tax Credits or Universal Credit receive 50p for every £1 they save, as part of the government’s Help to Save scheme. Over a four-year period, this could equate to up to £1,200.
Those in high-cost debt repayment spirals, meanwhile, benefit from a sustainable alternative. “When we refinance £2,500 of someone’s debts, we on average save them £600 relative to what they were paying before. This helps them get out of debt six to 12 months sooner,” explains Sarkar. “Because of salary deduction, repayments are always on time. We report this to the credit bureaus, which means their credit scores increase by about 10%.”