Personal Finance: Carpetbaggers beware!
The Government wants your building society windfall to go to charity.
Saturday 04 September 1999
The move is aimed at defeating "carpetbagging", the practice of becoming a member in the hope of grabbing free shares. Melanie Johnson, the Economic Secretary to the Treasury, is due to respond to a select committee report on demutualisation soon. She is expected to reject changes to building society law in favour of the windfall proposal.
The benefits to charity could be huge - Nationwide, the UK's largest remaining society, has already adopted a similar policy and some estimates suggest that up to pounds 2bn of its value is signed over to charity. The total from other societies could eventually double that amount.
However, Skipton Building Society has raised legal doubts about the plans. The society rejected this idea as part of its own anti-carpetbagger strategy over fears that the move could be open to legal challenge.
Mark Smitheringale, a Skipton spokesman, says: "The advice we've received has been that the legality of such schemes is probably not watertight. If it comes to a test case, it could be extremely interesting. Potentially, it's an absolute minefield." One Skipton insider says the society's fear was that any Skipton member who signed away his rights but later challenged the arrangement in court might well win.
Nationwide already insists that new members sign over their rights to any windfalls to the Nationwide Foundation, which donates about pounds 2m every year to charities such as Shelter and Breast Cancer Care.
Jeremy del Strother, the communications director at Nationwide, says: "We went to great lengths to ensure that we got the highest level of advice. We were very confident we'd come up with something that was very robust."
Lise Bulloch, of Britannia, another society with its own charitable scheme, adds: "We wouldn't have launched it if we thought it was not going to stand up in court."
Even so, other mutual societies object to the Treasury's idea because it would create two tiers of society members - existing members who qualified for windfall rights and new ones who did not.
James Evans, at Bradford & Bingley, says: "It's something we considered. We looked into it, and we decided not to do it. We want to keep one tier of membership."
John Gully, head of corporate communications at Portman Building Society, would rather see the Government raise the hurdle which all windfall campaigners must clear through statutory changes to the building societies' voting rules.
At the moment, most societies demand that 75 per cent of savers and 50 per cent of borrowers support conversion and that at least half the qualified members turn out to vote before a change can go through. Mr Gully would rather 75 per cent of both savers and borrowers required.
He says: "That would be beneficial for the industry in the long-term, rather than the short-termism which the Treasury is suggesting."
Mr del Strother says of the Treasury proposal: "I'm not sure I'd like to see it as a mandatory requirement because different organisations have different needs. Some of the small regional and local societies, for example, have achieved the same effect of deterring speculators by restricting new account opening to local people. Some have introduced high opening balances."
Nationwide's new account applications have fallen from 3,000 a day at the height of windfall mania to about 500 a day now. Skipton, which relied instead on increasing its minimum opening balance to as much as pounds 5,000, has seen applications fall from a peak of 40,000 accounts per month to about 8,000.
HOW THE TOP FIVE MUTUALS
FIGHT THE CARPETBAGGERS
New members must surrender windfall rights to charity.
2) Bradford & Bingley
New members accepted for deposit accounts only. Minimum deposit pounds 500
New savings members must give up windfall rights to charity
New members must surrender windfall rights to charity.
Postal applications from outside the South of England must make an initial deposit of at least pounds 1,000.
- 1 'Kidnapped boy may have been abused and murdered by VIP paedophile ring,' say police
- 2 Ridley Scott on Exodus, Gods and Kings casting: 'I'm not going to get it financed if my lead actor is Mohammad so-and-so from such-and-such'
- 3 Girl, 7, gets Tesco to remove 'stupid' sign suggesting superheroes are 'for boys'
- 4 This letter from a reader explains why women can’t play football
- 5 'You should come to my house and eat cheeses with me': 4-year-old sends adorable love letter to girl at school
Black Friday 2014: Opening times for Asda, John Lewis, GAME, PC World and Argos
Miss Honduras Maria Jose Alvarado's stylist Luis Alfredo Garcia is found stabbed to death
Dr Lam Hoe Yeoh: Voyeur doctor jailed for eight years after using network of hidden cameras to film patients, colleagues and friends on the toilet
'You should come to my house and eat cheeses with me': 4-year-old sends adorable love letter to girl at school
Scientists predict green energy revolution after incredible new graphene discoveries
Ukip says babies born to immigrants in the UK should be classed as migrants – which would include Nigel Farage’s own children
Rochester by-election: Ukip gains second MP as Tory defector Mark Reckless holds seat
'Beast of Bolsover' Dennis Skinner takes Ukip MP Mark Reckless to task moments after he is sworn in
The young are the new poor: Sharp increase in number of under-25s living in poverty, while over-65s are better off than ever
Tamir Rice: 12-year-old boy playing with fake gun dies after being shot by Ohio police
Exclusive: UK approved £7m Israeli arms sales in six months before Gaza conflict
iJobs Money & Business
£6000 - £60000 per annum + Bonus and Benefits: Ampersand Consulting LLP: UI De...
£18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...
Negotiable: h2 Recruit Ltd: A rapidly expanding, global Software/ SaaS Vendor ...
£20000 - £25000 per annum + OTE £Competitive: SThree: SThree Group and have be...