Goliaths take a beating

the types of Tessa available and see which have performed best

AVOID high street banks and most mainstream savings institutions when you are looking for a top-performing Tessa. For the best deals you will have to check out the lesser known smaller building societies.

Vicky Burn, deputy editor of MoneyFacts, a financial data magazine, says the big bank Goliaths were beaten hands down by the tiny building society Davids in its annual round-up of Tessa payout values.

The lucky saver who put pounds 9,000 into the top-performing Tessa from the Chorley & District building society in January 1993 would have reaped pounds 618 more than in the poorest one provided by Cater Allen Bank.

The magazine's performance chart shows that for Tessas taken out five years ago only one of the high street lenders comes in the top 20. This was with TSB. Halifax is the next big player but is well down the list at 25.

The rest of the nation's big hitters languish near the bottom end. Of the 92 Tessas monitored, NatWest came in at 73, Lloyds at 74, Midland and First Direct at 75 and 76, while Barclays' offerings were at 59 and 86.

Eight of the top 10 providers to January 1998 are building societies that have retained their mutual status. National Counties, at number 10, has just one branch.

Of the other top performers, Buckinghamshire, Tipton & Coseley and Holmesdale building societies, at five, six and eight respectively, are so tiny that they refuse to accept savers from outside their localities.

The largest mutuals, however, have failed to keep up with their smaller brethren. Bradford & Bingley's "High Return" product came 47th, Britannia BS was 57th and Nationwide came 62nd. The Consumers' Association says building societies were ahead of the banks in general because the banks need to make bigger margins to satisfy shareholders. Mick McAteer, senior policy researcher at the association, says 40 per cent of the banks' post- tax profits were paid in dividends. Stephen Bullock, the chief executive of Chorley & District building society, says: "The absence of shareholders has meant that building societies could improve rates by 0.4 per cent over their plc counterparts."

Mr McAteer says that the larger societies, which offer poorer value on the Tessa side, have keener rates on mortgages in general. Mr Bullock believes smaller societies can pay better rates because they are more specialist. Big societies such as Bradford & Bingley have diversified into a broader range of products.

Mark Hamilton, of the Nationwide, agrees with this. He says: "Tessas are the smaller societies' flagship products."

q Contacts: Cheshire BS, 0800 243278; Chorley & District BS, 01257 279373; Coventry BS, 0345 665522; Halifax, 0345 263646; Investec, 0171 283 9111; 'MoneyFacts', 01692 500765; National Counties BS, 01372 747771: Norwich & Peterborough BS, 01733 372222; Skipton BS, 0345 171777; Yorkshire BS, 0800 378836.

q Dido Sandler writes for 'Financial Adviser'.

Past winners

Top 20 performing variable rate Tessas (assuming investment of the pounds 9,000 maximum over five years)

Institution Payout value

Chorley & District BS pounds 11,602

Julian Hodge Bank pounds 11,600

Investec Bank (UK) pounds 11,593

Norwich & Peterborough BS pounds 11,576

Buckinghamshire BS pounds 11,565

Tipton & Coseley BS pounds 11,564

Cheshire BS pounds 11,564

Holmesdale BS pounds 11,559

Dunfermline BS pounds 11,547

National Counties BS pounds 11,534

Hinkley & Rugby BS pounds 11,531

Dudley BS pounds 11,525

TSB pounds 11,509

Loughborough BS pounds 11,505

Cambridge BS pounds 11,501

Melton Mowbray BS pounds 11,496

Monmouthshire BS pounds 11,493

Principality BS pounds 11,493

Earl Shilton BS pounds 11,477

Kent Reliance BS pounds 11,475

Source: MoneyFacts