Money Talk: Mutual, but for whose benefit?

REMEMBER last year how those building societies not handing out free shares were fond of telling us that customers would lose out eventually from taking the windfalls? All those nasty shareholders could only mean a worse deal and worse service was the suggestion.

Note, then, that it is the Halifax, that arch converter, and not one of the mutuals that starts the new year by launching a top-paying telephone savings deal; and that from March it is planning to open 200 of its branches on Sundays as well. No building society offers as much in either department.

Last year, Britain's dwindling band of societies set out their stall as offering a better deal to savers and borrowers. Now they are in danger of being left well behind by these and other improvements in service and value from the new "telebanks" (with Safeway offering the latest "best- buy" deal).

Like last year, this will be a momentous year for the mutuals. The takeover of Birmingham Midshires is already planned for the summer, while only last week it was the turn of Sun Life of Canada, the insurer, to announce a windfall proposal that could give 250,000 "with-profits" policy holders in the UK handouts worth at least pounds 1,000. The whiff of windfalls is not going to fade away; indeed, many societies already face challenges from conversion campaigners in elections to their boards of directors.

If societies expect their members to continue to vote for no change and no windfalls, they had better find some way of regaining the initiative. I have suggested in this column before, for example, that lenders should do their bit towards speeding up the house-buying process by giving guarantees on approving mortgages and turning round surveys. A "same day mortgage" would surely steal a march.

An equally welcome consumerist move would be to dump Mortgage Indemnity Guarantees (MIGs) - an insurance that all too many borrowers are forced to take out at a cost of up to pounds 1,000 or more even though they get no direct benefit from it (see page 20). Note, again, that it is direct lenders and non-mutuals that are at the forefront of giving better deals in both areas.

Finally, a well-known former executive of the Bradford & Bingley and an ex-City analyst of societies was quoted last week as suggesting the Skipton building society would be the next to sell out. My feeling is that, for now, life insurers are more likely to make the running, but there will be more demutualisations among societies, and almost certainly this year.

INVESTORS may be able to doubly salve their consciences before long.

The suggestion is that Friends of the Earth will soon launch its own "green PEP" that will invest according to "ethical principles" while making some money for the pressure group at the same time.

Ethical investments of this kind work by limiting where they put your money - mostly by not touching companies that damage the environment or commit other nasties. In some cases, they also deliberately pick companies that "do something positive". And while ethical PEPs and funds rarely have the lowest costs, many have performed well.

The Independent on Sunday has a new free guide to these and other ethical financial products, sponsored by Friends Provident, a leading investment manager in this area. For a copy phone 0800 214487, or cut out the coupon on page 19.