Your Money: Will this be the last of our mutual friends?

It could be a case of `I don't like Mondays' for supporters of building societies

THE WORKINGS of democracy have a curious effect on the passage of time. For weeks and months, as we struggle to decide one way or another over an issue, time elongates and appears to stand still. Then, the sudden announcement: the people have decided. Nothing will be the same again.

On Monday, a six-week balloting exercise will come to an end at Bradford & Bingley Building Society. It will announce the result of a vote among its 2.5 million members on whether the society should demutualise.

Experts believe the decision will determine whether the demutualisation bandwagon is derailed or (following last year's negative vote at Nationwide) is gathering pace and dragging other societies along with it.

B&B has pulled out all the stops to mobilise voters. More than 1.6 million votes are believed to have been cast, the highest turnout for a society challenged by one of its own members.

The result is set for a nail-biting finish. A society spokeswoman said: "We remain confident about the outcome, although we are not complacent."

The argument, as always, is about money. Would you rather have hundreds of free shares worth up to pounds 1,500 or lower mortgage costs and higher savings rates?

The lure of free shares is hard to ignore. Former members of Halifax, the society that converted in June 1997, received an average of 330 free shares each at demutualisation. The shares, worth 736 pence on flotation, are today almost 900 pence each.

Even more enticing is the fact that the total amount of dividends already paid out - or about to be in the next six weeks - amounts to about pounds 1 per share. In effect, someone with an average shareholding is in line for a payout of pounds 330; they are, moreover, sitting on about pounds 3,000 of free shares.

A Halifax spokeswoman says: "From the point of view of our shareholders, conversion has been an absolute success. there is no way that we would have been able to pay that much surplus capital to our members in the form of improved benefits."

Alliance & Leicester shares have done better than Halifax's - rising 72 per cent to 880 pence and worth pounds 2,200 to former members - although their dividend payout to date is pounds 112.

There is another fact to take into account. Of almost 7 million Halifax members who received free shares, barely 3.5 million are left; the 2.5 million Alliance & Leicester shareholders at launch are barely 1.1 million today.

Meanwhile, pro-mutual supporters argue, their customers are left paying for the flotation through higher mortgage charges and lower rates paid on their savings accounts.

This was underlined recently in a survey by Which?, which found that someone with an pounds 80,000 mortgage with Bradford & Bingley would have saved pounds 719 just between 1996 and 1998 compared to the average variable rate charged by eight other former building societies.

The society also paid an average 1 per cent more interest on pounds 3,000 held in a tax-free Tessa account than the average of the same eight converted societies - equal to pounds 150 in extra interest over a Tessa's lifetime.

Adrian Coles, director general at the Building Societies Association, says: "The reason why societies do so much better is that, unlike converters, they don't have to pay dividends to shareholders. That means they can pass on the benefits to all their members."

However, an Alliance & Leicester spokesman points out that headline rates are not always a reflection of good value: "Most new borrowers are on fixed, capped or discounted deals, where every lender will have its own atttractive rates, not just the mutuals."

At the same time, despite Bradford & Bingley's competitive prices, the cheapest variable mortgage rates at present come from Egg , Legal & General, Bank of Scotland and Standard Life Bank, three of which are part of publicly- quoted companies and only one (Standard) is mutually-owned.

For members at Bradford & Bingley, the verdict is due on Monday. Irrespective of their decision, the lure of free shares is probably too attractive for members of other societies to pass up. This will definitely not be the last vote on the issue.

Arts and Entertainment
Attenborough with the primates
tvWhy BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter
News
Campbell: ‘Sometimes you have to be economical with the truth’
newsFormer spin doctor says MPs should study tactics of leading sports figures like José Mourinho
Sport
football
Life and Style
Agretti is often compared to its relative, samphire, though is closer in taste to spinach
food + drink
Have you tried new the Independent Digital Edition apps?
Life and Style
ebookNow available in paperback
ebooks
ebookPart of The Independent’s new eBook series The Great Composers
News
Kelly Osbourne will play a flight attendant in Sharknado 2
people
News
Down-to-earth: Winstone isn't one for considering his 'legacy'
people
News
The dress can be seen in different colours
i100
Sport
Wes Brown is sent-off
football
Voices
Lance Corporal Joshua Leakey VC
voicesBeware of imitations, but the words of the soldier awarded the Victoria Cross were the real thing, says DJ Taylor
Life and Style
Alexander McQueen's AW 2009/10 collection during Paris Fashion Week
fashionMeet the collaborators who helped create the late designer’s notorious spectacles
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs General

    Recruitment Genius: Bookkeeper / Office Co-ordinator

    £9 per hour: Recruitment Genius: This role is based within a small family run ...

    Recruitment Genius: Designer - Print & Digital

    £28000 - £32000 per annum: Recruitment Genius: This Design and marketing agenc...

    Recruitment Genius: Quantity Surveyor

    £46000 per annum: Recruitment Genius: This property investment firm are lookin...

    Recruitment Genius: Telesales / Telemarketing Executive - OTE £30k / £35k plus

    £18000 - £35000 per annum: Recruitment Genius: This company specialises provid...

    Day In a Page

    War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

    The battle for Mosul will unleash 'a million refugees'

    Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn
    Yvette Cooper: We can't lose the election. There's too much on the line

    Yvette Cooper: We can't lose the election. There's too much on the line

    The shadow Home Secretary on fighting radical Islam, protecting children, and why anyone in Labour who's thinking beyond May must 'sort themselves out'
    A bad week for the Greens: Leader Natalie Bennett's 'car crash' radio interview is followed by Brighton council's failure to set a budget due to infighting

    It's not easy being Green

    After a bad week in which its leader had a public meltdown and its only city council couldn't agree on a budget vote, what next for the alternative party? It's over to Caroline Lucas to find out
    Gorillas nearly missed: BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter

    Gorillas nearly missed

    BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter
    Downton Abbey effect sees impoverished Italian nobles inspired to open their doors to paying guests for up to €650 a night

    The Downton Abbey effect

    Impoverished Italian nobles are opening their doors to paying guests, inspired by the TV drama
    China's wild panda numbers have increased by 17% since 2003, new census reveals

    China's wild panda numbers on the up

    New census reveals 17% since 2003
    Barbara Woodward: Britain's first female ambassador to China intends to forge strong links with the growing economic superpower

    Our woman in Beijing builds a new relationship

    Britain's first female ambassador to China intends to forge strong links with growing economic power
    Courage is rare. True humility is even rarer. But the only British soldier to be awarded the Victoria Cross in Afghanistan has both

    Courage is rare. True humility is even rarer

    Beware of imitations, but the words of the soldier awarded the Victoria Cross were the real thing, says DJ Taylor
    Alexander McQueen: The catwalk was a stage for the designer's astonishing and troubling vision

    Alexander McQueen's astonishing vision

    Ahead of a major retrospective, Alexander Fury talks to the collaborators who helped create the late designer's notorious spectacle
    New BBC series savours half a century of food in Britain, from Vesta curries to nouvelle cuisine

    Dinner through the decades

    A new BBC series challenged Brandon Robshaw and his family to eat their way from the 1950s to the 1990s
    Philippa Perry interview: The psychotherapist on McDonald's, fancy specs and meeting Grayson Perry on an evening course

    Philippa Perry interview

    The psychotherapist on McDonald's, fancy specs and meeting Grayson Perry on an evening course
    Bill Granger recipes: Our chef recreates the exoticism of the Indonesian stir-fry

    Bill Granger's Indonesian stir-fry recipes

    Our chef was inspired by the south-east Asian cuisine he encountered as a teenager
    Chelsea vs Tottenham: Harry Kane was at Wembley to see Spurs beat the Blues and win the Capital One Cup - now he's their great hope

    Harry Kane interview

    The striker was at Wembley to see Spurs beat the Blues and win the Capital One Cup - now he's their great hope
    The Last Word: For the good of the game: why on earth don’t we leave Fifa?

    Michael Calvin's Last Word

    For the good of the game: why on earth don’t we leave Fifa?
    HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

    Scientists hail daily pill that protects against HIV infection

    Breakthrough in battle against global scourge – but will the NHS pay for it?