Money: Mutuals' ISA dilemma

Clifford German on the latest battle against carpetbaggers

With just four weeks to go before cash-based mini-ISAs are due to go on sale, the remaining mutual building societies are under pressure. They are caught between the desire to offer Government-approved, CAT- marked mini-ISAS, which could bring in a new generation of small savers, and their need to keep out the carpetbaggers.

To obtain the Government's seal of approval the mini-ISAs must be easy- access and open to savers with as little as pounds 10 to invest. But with a deposit of just pounds 100, investors will qualify as members and will be entitled to share windfalls if the society converts or is taken over. Investors can only have one mini-ISA a year but a mini-ISA with pounds 100 could offer carpetbaggers a cheap way into membership of one more society and allow them to dodge the high opening balances for new accounts that many societies have imposed to discourage them.

Last week the Leeds & Holbeck followed the Nationwide, the Britannia, the Yorkshire and the Coventry in requiring new investors to sign a pledge to give any possible windfalls to charity. They will all now be able to offer CAT-marked, cash-only mini-ISAs without the risk of attracting a late rush of carpetbaggers. But some societies are still reluctant to create a two-tier structure with different rights for new and old members. Others have decided not to offer a CAT-marked ISA at all.

The Chelsea building society, which took a decision two years ago to impose a minimum investment of pounds 2,500 for new account holders, has decided not to offer any kind of cash-only ISA because it would open the way for carpetbaggers to get a cheap foothold in the society. The Skipton building society, which last year imposed a minimum investment of pounds 2,000 for all new account holders who were not already members, is expected to offer an ISA but it is also expected to require a minimum investment of at least pounds 2,000. That will put it well out of reach of small investors as well as most carpetbaggers, and means it certainly will not qualify for the CAT mark.

Other societies are still working on a strategy to meet the challenge of the carpetbaggers. The second biggest mutual, the Bradford & Bingley, which could conceivably survive as an independent bank, has taken the drastic step of rejecting all new accounts - at least until it has seen off the challenge by Stephen Major. He successfully tabled a motion for the AGM next month demanding that the society converts and distributes free shares to members. After that a new strategy will have to be developed.

The Portman building society, now the fifth biggest committed mutual, took a similar step last year when it was inundated by new investors after strong rumours that it was facing a potential bid from the Allied Irish Bank. The excitement has subsided and ISAs will be offered to existing members. (It is not yet certain, however, whether they will qualify for CAT marking.) But new accounts remain limited only to people living within the society's catchment area around its head office in Bournemouth. So far, it has rejected the idea of requiring all new investors to assign their potential windfalls to charity because it does not wish to create a two-tier membership.

The Derbyshire building society has also imposed limits on investments, requiring investors living outside its Midlands catchment area to put up pounds 5,000 to open a new account; some branches within the catchment have individual limits of pounds 1,000. The Derbyshire has decided in principle to offer a cash ISA after 5 April, but it will not qualify for the Government's CAT standard and the minimum investment rules for new investors will continue to apply.

Outside the top 10, the Cheshire plans to offer a cash-only ISA but the minimum investment will remain pounds 250 within the branch area and pounds 1,000 for outsiders. The Market Harborough will offer a CAT-marked ISA but it will only be available to people living in Leicestershire and Northants, and the minimum for outsiders to open an account remains at pounds 2,000. The Norwich & Peterborough, one of the most vocal champions of mutuality, still allows investors in the Anglia region to open accounts with pounds 100 and is due to announce its ISA policy shortly.

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
Finacial products from our partners
Property search

Santander's Kitti app aims to bring the good old cash kitty into the 21st century

The days of phoning round to chase up multiple contributions could well be a thing of the past

Questions of Cash: 'I want a refund on my TV licence payments but they've turned my claim into a soap opera'

An Independent reader was told to send bank statements to prove payment

Once bitten? Research shows that, in 19 out of 20 cases, desperate people are introduced to loan sharks by relatives or friends

How to avoid loan sharks: The alternatives for people who need credit fast

Simon Read meets a woman who became trapped in a cycle of debt

Profiteering? British Gas customers hit again as energy giant fails to pass on profits hike

The company made £63 a second but is only passing on £37 a year cuts to customers

China's stock market has tanked in the last month, losing 30 per cent of its value

China's stock market crash, Greece crisis: how do they affect your finances?

Video: Tom Stevenson, investment director at Fidelity Worldwide Investments, says it’s good to be aware of what’s going on in the world

Payday lender Cash Genie forced to repay £20m to ripped-off customers

The high-cost credit company preyed on vulnerable people struggling because of the recession

Mark Carney warns that the decision is likely to come into 'sharper relief' by 'the turn of the year'

An interest rate rise may be on the way - act now to secure a better mortgage deal

Competition has driven rates down but they could start drifting upwards

Santander 123 is attractive for those seeking interest on credit balances

Switching your current account? Pick one that reflects the way you run your finances

Andrew Hagger has carried out some research to try to establish which accounts are strongest in each of the different areas

A reader hit trouble after booking accommodation in a St Andrews hostel for the Open

Questions of Cash: 'Golfing break landed in the bunker when the price on the booking site was way below par'

One reader encountered a problem when booking accommodation at the St Andrews Tourist Hostel through HostelBookers

The Money Shop this week became the latest payday lender to have an ad banned

Payday lenders slammed for 'misleading' claims: charities say they're still not doing enough to help borrowers

Debt charities say there seems scant evidence to back up CFA's latest report

The crooks, like these in the 1955 film The Ladykillers, are waiting in the shadows as people cash in their savings

Savers are embracing their pension freedom ... and so are the scammers

There have been fresh warnings that scammers are trying to trick people into using liberated cash to invest in dodgy schemes

Don't get burnt: holidaymakers should check their plastic

How to avoid costly debit or credit card charges on overseas trips

Taking the wrong plastic can be a costly mistake, leaving you paying over the odds for your holiday spending money to the tune of £68, maybe more

From as far back as the Seventies, women have been drawn to the tables, attracted by the sense of feeling like a celebrity

Gambling is on the rise - so is enough being done to combat problem betting?

More and more of the 'AB' classes are joining the vulnerable in playing the odds, as Neasa MacErlean reports
No sunshine: Not all pensioners will be as happy as these women

Freedom reform leads to £1.8bn run on pension pots

But the right of over-55s to withdraw their retirement nest-eggs opens the door to scammers.

Mark Carney; '[there is] no immediate need to increase interest rates'

Interest rates: five things you need to know about a rise in rates by the end of the year

Mark Carney said the decision to raise interest rates was likely to come by 'the turn of the year'

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Customer Service Administrator

    £13000 - £15000 per annum: Recruitment Genius: Are you passionate about custom...

    Recruitment Genius: Dialler Administrator

    £22000 - £25000 per annum: Recruitment Genius: Main purpose: Under the directi...

    Ashdown Group: Contracts Manager - City of London

    £35000 - £37000 per annum + benefits : Ashdown Group: Contracts Manager - City...

    Guru Careers: Tax Manager / Accountant

    £35 - £50k DOE: Guru Careers: A Tax Manager / Accountant (ACA / CA / CTA) is n...

    Day In a Page

    Blairites be warned, this could be the moment Labour turns into Syriza

    Andrew Grice: Inside Westminster

    Blairites be warned, this could be the moment Labour turns into Syriza
    HMS Victory: The mystery of Britain's worst naval disaster is finally solved - 271 years later

    The mystery of Britain's worst naval disaster is finally solved - 271 years later

    Exclusive: David Keys reveals the research that finally explains why HMS Victory went down with the loss of 1,100 lives
    Survivors of the Nagasaki atomic bomb attack: Japan must not abandon its post-war pacifism

    'I saw people so injured you couldn't tell if they were dead or alive'

    Nagasaki survivors on why Japan must not abandon its post-war pacifism
    Jon Stewart: The voice of Democrats who felt Obama had failed to deliver on his 'Yes We Can' slogan, and the voter he tried hardest to keep onside

    The voter Obama tried hardest to keep onside

    Outgoing The Daily Show host, Jon Stewart, became the voice of Democrats who felt the President had failed to deliver on his ‘Yes We Can’ slogan. Tim Walker charts the ups and downs of their 10-year relationship on screen
    Secrets of comedy couples: What's it like when both you and your partner are stand-ups?

    Secrets of comedy couples

    What's it like when both you and your partner are stand-ups?
    Satya Nadella: As Windows 10 is launched can he return Microsoft to its former glory?

    Satya Nadella: The man to clean up for Windows?

    While Microsoft's founders spend their billions, the once-invincible tech company's new boss is trying to save it
    The best swimwear for men: From trunks to shorts, make a splash this summer

    The best swimwear for men

    From trunks to shorts, make a splash this summer
    Mark Hix recipes: Our chef tries his hand at a spot of summer foraging

    Mark Hix goes summer foraging

     A dinner party doesn't have to mean a trip to the supermarket
    Ashes 2015: With an audacious flourish, home hero Ian Bell ends all debate

    With an audacious flourish, the home hero ends all debate

    Ian Bell advances to Trent Bridge next week almost as undroppable as Alastair Cook and Joe Root, a cornerstone of England's new thinking, says Kevin Garside
    Aaron Ramsey interview: Wales midfielder determined to be centre of attention for Arsenal this season

    Aaron Ramsey interview

    Wales midfielder determined to be centre of attention for Arsenal this season
    Community Shield: Arsene Wenger needs to strike first blow in rivalry with Jose Mourinho

    Community Shield gives Wenger chance to strike first blow in rivalry with Mourinho

    As long as the Arsenal manager's run of games without a win over his Chelsea counterpart continues it will continue to dominate the narrative around the two men
    The unlikely rise of AFC Bournemouth - and what it says about English life

    Unlikely rise of AFC Bournemouth

    Bournemouth’s elevation to football’s top tier is one of the most improbable of recent times. But it’s illustrative of deeper and wider changes in English life
    A Very British Coup, part two: New novel in pipeline as Jeremy Corbyn's rise inspires sequel

    A Very British Coup, part two

    New novel in pipeline as Jeremy Corbyn's rise inspires sequel
    Philae lander data show comets could have brought 'building blocks of life' to Earth

    Philae lander data show comets could have brought 'building blocks of life' to Earth

    Icy dust layer holds organic compounds similar to those found in living organisms