Carpetbaggers get ready for new wave of mutual windfalls
This time, however, savers don't need to campaign against building societies. David Prosser reports
Saturday 18 March 2006
Could carpetbagging be back? Five years after a small army of windfall hunters gave up on their campaign to convert Britain's remaining building societies into banks, 2006 could be the year in which the mutual sector once again proves profitable for speculators.
The windfall frenzy of the late Nineties followed a series of demutualisations in which organisations including Halifax, Alliance & Leicester and Northern Rock shed their building society status, awarding free shares worth thousands of pounds to millions of members.
The carpetbagging gravy train was not finally derailed until 2001, when Nationwide - which remains the UK's largest society by some margin - defeated attempts by carpetbaggers who wanted it to demutualise. That spelt the end of similar efforts at around five other societies.
This year, however, more than 100,000 building society members are in line for windfalls. Their societies are being taken over by larger rivals, rather than converting to banking status, but members are still getting the free money.
Two weeks ago, the board of the Lambeth Building Society announced that its 70,000 members would get cash windfalls of at least £400 if they backed a merger with Portman Building Society. It followed an announcement in January from Leeds Building Society. It is taking over the Mercantile, where 30,000 qualifying savers and 4,000 qualifying borrowers are in line for bonuses of at least £100 if the deal goes ahead.
Gordon Robinson, chief executive of the Mercantile, says that while he believes in mutual organisations' advantages over public companies owned by shareholders, many smaller societies are struggling to stay on top of costs.
"Taking into account this maturing marketplace, with its regulatory requirements, demands for ever more sophisticated IT and greater competition, we decided that the long-term interests of our members would be best served by seeking a partner who can bring the benefits of greater size," Robinson says.
Robert Sharpe, Portman's chief executive, says he expects to see further consolidation in the building society sector - already down to 61 societies from more than 150 around 20 years ago - for similar reasons. "If the market remains as competitive as it is now, some of the smaller societies will find it more and more difficult to cope with operating costs," he warns.
In which case, what's to stop a new generation of carpetbaggers targeting the smaller building societies in order to join the party? To become a member of a society, savers can open an account, often with as little as £100, and earn interest on their money while they're waiting for a windfall. It's a no-lose gamble.
Rachel le Brocq, of the Building Societies Association, confirms that qualifying members will almost always be in line for windfalls when two societies merge. "There's no legal requirement for bonuses to be paid in these cases, but it has become standard practice in recent times," she says.
The prospect of a new round of building society windfalls is already attracting interest from potential carpetbaggers. Users of internet sites such as The Money Bag (themoneybag.com) and Moneysavingexpert.com, for example, have begun discussing whether Portman's announcement will trigger similar deals elsewhere.
However, there are two major obstacles any windfall seeker must tackle. First, it isn't possible to campaign for your society to merge with a larger rival, in the way that members previously used to group together to trigger votes on whether a society should demutualise.
Second - and even more seriously - the vast majority of building societies now have measures in place to deter carpetbaggers. Most require new members to assign any future windfall rights to charity, so even if you spot a potential deal, it may be impossible to benefit from it.
Nevertheless, the consolidation of the building society sector means anyone with an account at a smaller player should certainly maintain their membership. And there is a small group of societies - all of which could be potential takeover targets due to their small size - which do have fewer restrictions on new members.
Moreover, carpetbaggers wrestling with their consciences don't have to worry about benefiting from a society turning its back on the mutual sector. This time, the windfalls on offer are from organisations that will remain mutually owned.
Societies in the firing line
The following building societies do not require new members to assign windfall rights to charity, although they may have other restrictions in place.
None has announced specific plans to merge with larger societies, but all nine have assets of £750m or less, making them smaller than Lambeth Building Society.
Open to local residents only: Cambridge, City of Derry, Hinckley & Rugby, Vernon building societies.
Higher opening balances for non-locals: Shepshed, Swansea building societies.
Members of green organisations only: Ecology Building Society.
No restrictions: Catholic, Hinckley & Rugby (selected accounts), Saffron Walden building societies.
Independent Partners: See how much you could save by switching credit cards. Compare now
elephant appealThe first 23 lots in our charity auction have now gone. But there are 22 more still up for grabs
From rainforests and reefs to beaches and boat trips
comedy'Fresh Meat' star sees off stiff competition from Alan Carr, David Mitchell, Graham Norton, Lee Mack and Sarah Millican to win top prize
- 1 Pensioner James Gray places advert in newspaper for company on Christmas Day
- 2 Australia incest case: Deformed children found in remote farming community after generations of inbreeding
- 3 Physicists discover 'clearest evidence yet' that the Universe is a hologram
- 4 Woman who miscarried in private prison 'made to clean up after herself,' court told
- 5 Fox News presenter tells viewers it is a 'fact' that both Jesus and Santa Claus are white
- < Previous
- Next >
iJobs Money & Business
£40000 - £60000 per annum + Bonus + Benefits: Harrington Starr: Risk Managemen...
£Attractive Package: Citifocus: This is a new role offering the successful can...
£250 - £300 per day: Harrington Starr: Help drive the design, utilization and ...
£32000 per annum: Harrington Starr: Desktop Support (client facing, 1st/2nd Li...
Day In a Page
A six-bedroom farm house with separate, detached cottages and 371 acres of land
A two-bedroom cottage with parquet floors, chunky beams and an open fireplace
A Grade II-listed home with six bedrooms, secluded landscaped gardens and views across Hadley Green
A Grade II-listed mansion with two apartments and a cottage, near Gretna Green
A three-bedroom Grade II-listed mews house with vaulted ceilings and roof garden
A spacious Grade II-listed family home with annexe and equestrian facilities among four acres of land in Itchingfield
A four-bedroom home with exposed brick walls and open fires in the picturesque village of Northill
A Grade II-listed property with five bedrooms and unique tower, overlooking Hastings Old Town
A charming five-bedroom detached family home, set within half an acre in Kew
A two-bedroom maisonette set on the top two floors of a period building, close to Kentish Town Tube.
Take advantage of the extra space provided by former stables and outbuildings at this five-bedroom farmhouse.
This three-bedroom Victorian terrace is near to Queen’s Road Peckham station, Nunhead station.
A five-bedroom modern house with terrace, swimming pool, Zen treehouse and large carp pond
An unexpected gem with four bedrooms, remarkable vaulted reception and a galleried study area
A five-bedroom house in one of Lymington's most sought after tree lined avenues, moments from the marinas and sailing clubs
A grand early 19th century B&B close to the historic harbour, with four en suite bedrooms
A four-bedroom, 17th century home with walled gardens, a landscaped terrace, cellar and open fires
A six-bedroom house with five bathrooms and four reception rooms spread over 4,000sq ft of luxury living space
A stunning three double-bedroom apartment with two decked terraces in the exclusive gated community, Bromyard House
A 10-bedroom period, family home amid beautiful surroundings in the centre of the Wentworth Estate in Longcross village
A stylish three-bedroom apartment with two bathrooms and private landscaped garden, moments from Fitzroy Square
A Grade II-listed Elizabethan barn with landscaped gardens, exposed elm beams and four bedrooms, all with lovely views
A six-bedroom family home, dating back to 1280 with four reception rooms, barn, swimming pool and tennis courts in Harwell
A spacious two-bedroom flat, refurbished to a very high standard with private landscaped garden, close to Kentish Town station
An exceptional two-bedroom apartment with balcony and underground parking in the centre of Richmond
A one-bedroom, luxury, duplex apartment in the grand landmark building, Imperial Hall
Run a fabulous boutique shop, live above it in a one-bedroom flat and let a second one-bedroom flat that comes part and parcel
A Grade-II listed, thatched cottage in Hundleby village, with five bedrooms, a coach house and three and a half acres
A spacious two-bedroom flat in the heart of Hoxton Square with wooden floors and roof terrace
A five-bedroom family home with stunning pool and gym complex set among two acres of land
A six-bedroom period house with heated swimming pool and a separate two-bedroom annexe cottage in Townlake, £795,000
A spacious and contemporary two-bedroom flat arranged over three floors, with garden patio close to St George Square, £600,000
A one-bedroom flat in a beautiful Regency building opposite the beach in Kemp Town, £190,000
A two-bedroom flat with London skyline views close to Surrey Quays. £395,000.
A seven-storey tower with three bedrooms and a stunning roof terrace. Guide price: £850,000.
A 16-bedroom country pile with nine reception rooms, four self-contained flats and a 13th century Peel Tower. £850,000.
A classic six-bedroom Victorian Manse house 10 miles from Edinburgh. £495,000.
John Lennon's childhood home in Liverpool to be sold at auction. Guide price: £150,000-£250,000.
A six-bedroom detached period property with secluded gardens, ample parking and a double garage in Rye, £675,000.
A large split-level property with three double-bedrooms and roof terrace, close to Crouch End Broadway, £625,000.