Freedom for savers after the bonanza

Society investors can now hunt for better rates. Steve Lodge reports

The windfall-yielding building societies are finally unshackling their savers. Millions who have felt locked in for fear of missing out on free share and cash handouts can now freely spend their savings and start hunting for better rates elsewhere. This liberation is likely to fuel better savings rates generally as institutions fight to attract and keep the footloose cash.

Savers with the Halifax, who last week voted overwhelmingly in favour of the society's planned conversion into a bank, can now run their balances down to as little as pounds 1 without affecting their windfall entitlement. Those with the Woolwich and Alliance & Leicester have been free for some weeks to run down their savings.

The Bristol & West also unlocked its doors last week - with the caveat that those due bigger bonuses may need to top up their accounts again in June to maximise their windfalls. Prior to last week Bristol & West savers had been in the dark as to whether taking money out of their accounts would affect this extra entitlement.

The last of the five societies due to pay windfalls this year - Northern Rock - will give details of its handout tomorrow.

The average windfalls due from each society are listed in the table on the right, but some bigger savers could end up with handouts worth pounds 5,000 or more from the Halifax, Woolwich and Bristol & West. The Alliance & Leicester is giving a fixed number of shares likely to be worth around pounds 1,000 to all its qualifying savers and borrowers. Northern Rock is expected to pay more to bigger and longer-term savers.

The only remaining requirement for savers with the Halifax, Woolwich and Alliance & Leicester is keep open a qualifying account. The minimum balance depends on the account but may be as low as pounds 1. The societies will be able to give details - so check before withdrawing your cash or you could rule yourself out of the handouts.

The Bristol & West is advising all its savers to keep a minimum of pounds 100 in qualifying accounts until they get their windfalls. Those who qualify for more than its basic pounds 250 payout can run down their savings for now but may need to top up their accounts again in June. These "qualifying two-year investing members" - those with accounts in 1994 and with balances of at least pounds 100 on 14 April, 1996 and 31 December, 1996 - are due handouts of pounds 500 cash plus an extra bonus worth around 6.5 per cent of their savings. This additional bonus will be calculated according to the lower of a saver's balances on 14 April last year and 25 June this year.

The converting societies are aware that they risk big outflows of savings - so expect their rates to become keener. But it is still worth shopping around. Societies like the Nationwide and Bradford & Bingley that have insisted they will not go the way of the Halifax et al are claiming to offer better rates, and there are newcomers like Direct Line and even Sainsbury's that are offering 5 per cent-plus on relatively low balances.

The remaining building societies could be particularly attractive homes for savers given that they too might yield windfalls in the future, however much they deny it now. The Birmingham Midshires and Skipton are favourites to be the next to go.

With all the converting societies, mortgage borrowers also qualify for windfalls (on top of anything they might get as savers) and these borrowers should avoid paying off their loans in advance of getting their handouts. All the societies have arrangements to allow borrowers whose loans are virtually paid off to maintain minimal mortgages and so not lose their windfalls. If you suspect you are in this situation talk to your society.

q Helplines: Halifax, 0800 88 88 44; Woolwich, 0345 022 033; Bristol & West, 0800 88 66 33; Northern Rock, 0345 44 88 66; Alliance & Leicester, 0990 785163.

THE HIGH SOCIETY HANDOUT

Building society Average windfall When you'll get it

Alliance & Leicester pounds 1,000 shares 21 April

Woolwich pounds 1,200 shares 7 July

Halifax pounds 1,300 shares June

Northern Rock pounds 1,250 shares October

Bristol &West pounds 600 cash/shares Late August