Those windfalls aren't in the carpet bag yet

Suddenly, building societies are sexy. But it's hard to predict which will merge and deliver free cash

"How many more will go this year?" frets Wjet4.

"I've yet to find a building society that does not have a process of making you donate any windfall to charity," adds Tinker.

"And what to do about Nationwide, that granddaddy of them all?" ponders MsL.

When talk of their mergers and demutualisations reaches internet chatrooms and blogs, it's a sure sign that building societies are buzzing. What is normally one of the quieter sectors of the UK's ferocious financial services market has become the focus of lively consumer interest since the start of this year.

Three proposed mergers - Leeds and Mercantile, announced in January; Portman and Lambeth in March; and, 10 days ago, Newcastle and Universal - will deliver windfalls to their members ranging from £100 to £2,500. Speculation is rife that more are to come.

The merger activity is being driven by the potential for building societies, or mutuals, to cut their costs and gain a greater share of the mortgage, savings and investment markets. At the same time, they are giving a commitment that branch closures will be kept to a minimum.

Most of the UK's 63 building societies have long insisted that new members sign away rights to any demutualisation payouts. This is intended to deter the "carpetbaggers" - those who open an account simply to cash in on possible gains from stock market floats.

But the Kent Reliance building society caused a stir recently by abandoning its demand that all new customers with mortgage or savings accounts sign a "charitable assignment" form, so giving away any windfall they might receive. Now, in the event of any demutualisation - as unlikely as many think that might be for such a small society - new members will have the same rights as existing ones, as long as they put at least £100 into the mutual.

The successful demutualisation campaign run by the insurer Standard Life ended last week when 98 per cent of members who voted sanctioned its plans to float on the London Stock Exchange. But within hours, Nationwide, the UK's biggest building society with 11 million members, had issued a tart response.

"Reports of the death of mutuality have been greatly exaggerated," stressed Stuart Bernau, Nationwide's executive director. "It is very much alive and kicking in the building society sector.

"Mutuality matters but we also recognise that an organisation really does have to work hard to make it matter," he added.

Yet it is merger speculation, not the death of the mutual, that is the current hot topic in the sector.

As the chatroom comments quoted above show, there is great interest in whether new members of merged building societies will qualify for any windfalls. In contrast to payouts made after a demutualisation, merger windfalls (taxable, it should be remembered) over the past few years have tended to be given to all members, regardless of how long they have held their account.

Take, for example, the takeover by Portman, the UK's third-biggest building society, of Lambeth. Whereas many members had signed away their rights to a windfall under the "charitable assignment" clause, there was no such rule in the event of a merger. So, in this case, Lambeth borrowers will receive at least £400 and there will be up to £2,500 for savers. To qualify, members must have been saving or borrowing at least £100 on 31 January this year.

Robert Sharpe, chief executive of Portman, talks openly of his desire to grow the mutual by acquiring other building societies. Late last year, a merger with Yorkshire building society, which would have created a powerhouse to rival Nationwide, fell through at the very last minute.

Privately, many chief executives talk of much more activity this year, although most are guarded about their own intentions.

But two weeks ago, Philip Williamson, chief executive of Nationwide, made it clear that while he wasn't going hunting, any smaller society was welcome to get in touch. His phone hadn't been ringing, though, he added.

Britannia, the UK's second- biggest building society, sounds a similar note. "We are not putting out feelers, but if any proposition came along we would look at it," says a spokeswoman.

Rob Proctor, deputy chief executive at Kent Reliance, says: "It's inevitable some merging will take place this year; [smaller societies] cannot rest on [their] laurels. We recognise that the world is changing and it's going to be more difficult for smaller players.

"We haven't had any merger approaches this year but building societies are always talking to each other."

So there are no obvious clues for those chatroom surfers and others looking to try to bag a windfall from a merger - or even a surprise demutualisation.

"It's increasingly hard to find the next building society [that's going to change ownership]," says Justin Modray of independent financial adviser Bestinvest. "The days of carpetbagging aren't entirely dead, but it's harder to do."

Those keen on taking a punt could, he says, try depositing a small sum of at least £100 in societies where they are allowed to do so without signing away any windfall rights.

But he adds: "Far better to focus on one or two building societies with good savings rates that you think will do well."

Adrian Coles, director-general of the Building Societies Association, anticipates more merger activity but dismisses any effort to try to second-guess the next one: "Most people who do so will be very disappointed."

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

PROMOTED VIDEO
News
REX/Eye Candy
science
News
A photo of Charles Belk being detained by police on Friday 22 August
news
News
i100
Sport
Alexis Sanchez celebrates after scoring his first goal for Arsenal in the Champions League qualifier against Besiktas
sportChilean's first goal for the club secures place in draw for Champions League group stages
Arts and Entertainment
Amis: 'The racial situation in the US is as bad as it’s been since the Civil War'
booksAuthor says he might come back across Atlantic after all
Extras
indybest
Life and Style
Google Doodle celebrates the 200th birthday of Irish writer Sheridan Le Fanu
tech
Arts and Entertainment
Vinyl demand: a factory making the old-style discs
musicManufacturers are struggling to keep up with the resurgence in vinyl
News
i100
News
In Eternal Sunshine of the Spotless Mind Jim Carrey and Kate Winslett medically erase each other from their memories
scienceTechnique successfully used to ‘reverse’ bad memories in rodents could be used on trauma victims
Arts and Entertainment
Singer Pixie Lott will take part in Strictly Come Dancing 2014, the BBC has confirmed
tv
Finacial products from our partners
Property search
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 Money & Business

    C# Developer (C#, ASP.NET Developer, SQL, MVC, WPF, Real-Time F

    £40000 - £48000 per annum + benefits+bonus+package: Harrington Starr: C# Devel...

    C# Swift Payment Developer (C#, ASP.NET, .NET, MVC, Authorize.N

    £45000 - £60000 per annum + benefits+bonus+package: Harrington Starr: C# Swift...

    DevOps Engineer - Linux, Shell, Bash, Solaris, UNIX, Salt-Stack

    Negotiable: Harrington Starr: A fast growing Financial Services organisation b...

    Trade Desk FIX Analyst - (FIX, SQL, Equities, Support)

    £50000 - £60000 per annum + excellent benefits: Harrington Starr: An award-win...

    Day In a Page

    Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

    Robert Fisk: No victory for Israel despite weeks of devastation

    Palestinians have won: they are still in Gaza, and Hamas is still there
    Mary Beard writes character reference for Twitter troll who called her a 'slut'

    Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

    The Cambridge University classicist even wrote the student a character reference
    America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

    America’s new apartheid

    Prosperous white districts are choosing to break away from black cities and go it alone
    Amazon is buying Twitch for £600m - but why do people want to watch others playing Xbox?

    What is the appeal of Twitch?

    Amazon is buying the video-game-themed online streaming site for £600m - but why do people want to watch others playing Xbox?
    Tip-tapping typewriters, ripe pongs and slides in the office: Bosses are inventing surprising ways of making us work harder

    How bosses are making us work harder

    As it is revealed that one newspaper office pumps out the sound of typewriters to increase productivity, Gillian Orr explores the other devices designed to motivate staff
    Manufacturers are struggling to keep up with the resurgence in vinyl records

    Hard pressed: Resurgence in vinyl records

    As the resurgence in vinyl records continues, manufacturers and their outdated machinery are struggling to keep up with the demand
    Tony Jordan: 'I turned down the chance to research Charles Dickens for a TV series nine times ... then I found a kindred spirit'

    A tale of two writers

    Offered the chance to research Charles Dickens for a TV series, Tony Jordan turned it down. Nine times. The man behind EastEnders and Life on Mars didn’t feel right for the job. Finally, he gave in - and found an unexpected kindred spirit
    Could a later start to the school day be the most useful educational reform of all?

    Should pupils get a lie in?

    Doctors want a later start to the school day so that pupils can sleep later. Not because teenagers are lazy, explains Simon Usborne - it's all down to their circadian rhythms
    Prepare for Jewish jokes – as Jewish comedians get their own festival

    Prepare for Jewish jokes...

    ... as Jewish comedians get their own festival
    SJ Watson: 'I still can't quite believe that Before I Go to Sleep started in my head'

    A dream come true for SJ Watson

    Watson was working part time in the NHS when his debut novel, Before I Go to Sleep, became a bestseller. Now it's a Hollywood movie, too. Here he recalls the whirlwind journey from children’s ward to A-list film set
    10 best cycling bags for commuters

    10 best cycling bags for commuters

    Gear up for next week’s National Cycle to Work day with one of these practical backpacks and messenger bags
    Paul Scholes: Three at the back isn’t working yet but given time I’m hopeful Louis van Gaal can rebuild Manchester United

    Paul Scholes column

    Three at the back isn’t working yet but given time I’m hopeful Louis van Gaal can rebuild Manchester United
    Kate Bush, Hammersmith Apollo music review: A preamble, then a coup de théâtre - and suddenly the long wait felt worth it

    Kate Bush shows a voice untroubled by time

    A preamble, then a coup de théâtre - and suddenly the long wait felt worth it
    Robot sheepdog technology could be used to save people from burning buildings

    The science of herding is cracked

    Mathematical model would allow robots to be programmed to control crowds and save people from burning buildings
    Tyrant: Is the world ready for a Middle Eastern 'Dallas'?

    This tyrant doesn’t rule

    It’s billed as a Middle Eastern ‘Dallas’, so why does Fox’s new drama have a white British star?