The cost of childcare can be a stressful ‘how much?’ moment for many parents.
Families can part with almost £7,000 a year for a part-time nursery place, or more than £12,000 for a full-time spot, for a two-year-old, according to charity Coram Family and Childcare.
A new childcare employee benefit scheme, Catapillr, has now launched claiming that it can help parents cope with that.
The idea is that workers could borrow money for childcare to help them budget in a similar way to commonplace interest-free rail a season ticket loans
Caterpillr has launched a new employee benefits scheme which allows parents access to up to £10,000 interest free
Catapillr, the online portal behind the Childcare Cash Advance Scheme, enables companies to provide financial support for their employees’ childcare costs for early years and school-age childcare.
Through the scheme, parents are able to borrow to pay for childcare via a 12-month interest-free loan scheme, managed by Catapillr’s online hub.
While anyone whose income doesn’t regularly cover childcare monthly bills should be wary of borrowing, it can help those whose income is irregular, or faces one-off upfront costs from a child starting nursery.
Money borrowed can also be paid into the government tax-free childcare scheme to gt a 25 per cent boost.
It is a similar concept to workers buying their train season tickets via an interest-free loan at work, with repayments deducted at payday.
And while childcare bills don’t arrive in a similar one-off bill for thousands of pounds, as a rail season ticket does, they can be lumpy and hard to pay.
Phil Robinson, chief executive of Catapillr, says: ‘As a working parent of three children, I fully understand the stress and financial pressure the cost of childcare causes parents.
‘I set up the Childcare Cash Advance Scheme, a new and innovative employee benefit, to help with their wellbeing.’
The new scheme is aimed at parents struggling to cover upfront costs of nurseries and pre-schools, which can typically charge four to six weeks childcare services in advance, which often acts as a financial barrier for parents returning to work.
The scheme is free for employees and users of the platform.
Robinson says a fee is, however, charged to employers every time an employee takes out a loan. ‘Our minimum fee is £100 and maximum fee £155, which would be for a £10,000 loan.’
A welcome initiative?
Becky O’Connor, from Royal London, welcomed the initiative saying it could help to prevent parents having to rely on more expensive debt.
‘For big bills like childcare and rail season tickets, interest-free cash advance schemes from your employer (if your employer offers them) are worth considering in general.
Parents can apply for a loan of up to £10,000 from the Caterpillr scheme which will be offered through employers
‘Anything that helps working parents who are struggling to keep their jobs and pay for childcare – and also helps them avoid costly, unmanageable debt, has to be a good thing.
‘These schemes also work for employers, who want to retain staff who have children.
‘This loan scheme could be particularly beneficial for parents paying for holiday clubs in advance before the holidays, who might not have enough cash upfront.’
Phil Robinson says Catapillr will charge companies a minimum £100 and a maximum of £155 to offer the benefit
It is compatible with current government childcare support schemes, meaning those taking the money could receive an additional 25 per cent top-up from the Government on their Childcare Cash Advance Scheme Loan, if they pay it into a tax-free childcare account.
O’Connor explains: ‘I think this is a good way to reach parents who are eligible for the tax-free childcare scheme but haven’t heard of it, as uptake is still dismally low.’
However, Sarah Coles, of Hargreaves Lansdown, warns families that are already struggling to make ends meet each month to tread carefully.
‘If you’re already in a debt hole, then borrowing more is usually not a great way of getting out of it.
‘Repaying this particular debt will come straight out of your salary, so you can’t easily default on it, but it will make it more difficult to afford to repay other debts.’
Employers should do more
Ms O’Connor pointed out that offering such a scheme was a good way of retaining talented workers with children but added that there was still more that employers could do.
She says: ‘I think employers also need to offer flexible working to help with childcare – it’s one thing helping with paying for nursery bills but also need to be understanding that workers’ hours are effectively guided by the availability of childcare.
‘More on-site, quality, subsidised nurseries from employers would certainly help…these schemes are springing up because childcare, especially if it needs to be paid for in advance, is increasingly unaffordable, even after the 25 per cent top up from the Government in the form of tax-free childcare.
‘Not that many parents of young children have £1,000 plus sitting around with which they can just pay for an advance childcare bill.’
Childcare costs in England can range over £12,000 a year according to the charity, Coram Family and Childcare
How does Catapillr work?
Companies that want to offer this benefit, can register at Catapillr.com and then tailor their own personal lending criteria – from maximum loan amount to minimum length of service.
There is no minimum loan amount but there is a maximum required by law.
Phil adds: ‘Based on current tax rules, an employer can lend up to the £10,000, as a non-taxable benefit, during a 12 month period and hence this would be the maximum.’
When the loan amount has been agreed and signed between the employer and employee, an online account is created allowing the employer to transfer the loan direct in their employee’s Catapillr account.
There’s a bit more admin involved – if you are choosing to put this into your tax-free childcare account you would need to do this yourself.
A spokesperson explains: ‘The Catapillr loan is managed by their central hub but it’s up to the individual on what childcare they want to use it for.
‘The parent could transfer some or all of it to their tax-free childcare account to make the most of the additional top up. The beauty is they can manage their childcare costs in one place with Catapillr.’
Once the loan is credited to their account, the employee will be able to choose, book and pay for all their childcare services.
These include Ofsted registered childminders, nannies, nurseries and professional children’s activities and additional teaching professionals such as after school clubs, holiday clubs, sport activities and tutors from the very same digital portal.
It’s not a salary sacrifice scheme but an interest-free advance, repayable within 12 months. Repayments are deducted directly from the employee’s direct net pay.
What help do you currently get from government?
The childcare voucher scheme, which was an employee benefit open to eligible staff was closed in October 2018. It was replaced with Tax Free Childcare.
There are an estimated 1. 3 million families with qualifying childcare that are eligible for Tax-free Childcare in the UK in 2019/2020.
Tax Free Childcare is awarded to eligible families and can shave off 20 per cent of childcare costs.
Meanwhile, parents of three and four year olds can also qualify for up to 30 hours free childcare a week if they meet certain criteria.
Upon approval through the Gov.uk website parents are sent a code to give to their chosen childcare provider.
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