Where to go for society bonanzas

With more mergers and takeovers ahead, Steve Lodge offers savers a guide to likely windfalls

MILLIONS of savers and borrowers with the Alliance & Leicester are set to become the latest lucky beneficiaries of the shakeout among building societies. The society is planning to announce its conversion into a bank later this year, the Independent revealed last week. The switch could lead to an average windfall of pounds 590 for the vast majority of the society's nearly 4 million customers.

The move, which the Alliance & Leicester would not officially confirm, would be the latest in a series of structural changes among societies, which have proved highly lucrative for customers. Already this year, Lloyds Bank's takeover of the Cheltenham & Gloucester has yielded payouts averaging pounds 2,200 for that society's savers. Savers and borrowers with the Halifax and its merger partner, the Leeds Permanent, as well as those with the National & Provincial (which is being taken over by the Abbey National), have been promised shares or cash amounting to perhaps pounds 800 or more each.

Other societies could well be taken over, convert into banks or merge. In each case, savers and borrowers get to vote on changes. This normally means some payout offer to win your agreement.

Together with leading building society analyst Rob Thomas at City stock broker UBS and Moneyfacts, which monitors account rates, we have produced a guide to the best accounts to open with the remaining societies and the possible windfalls. The table shows the 10 biggest societies where savers might still benefit from opening accounts. We have excluded societies that are already officially changing status - all have said only existing savers and borrowers would benefit from payouts. The Alliance & Leicester, therefore, could still be in play for windfall hunters.

The possible windfall figures give an indication of the societies with the potential for the highest payouts. But actual windfalls will depend on the structure of any deal. Savers who open accounts now can think in terms of a basic payout of pounds 500.

Savers wanting to play the building society bonanza game will need the following:

q Spare cash. To open new accounts with the greatest chance of windfalls, most societies require at least pounds 500. You want what is deemed a share account, and an ongoing balance of at least pounds 100 for the right to vote on proposed changes in status.

All the accounts in the table are share accounts. The focus is on instant- access accounts because these tend to require the lowest opening balances. But we have included other options, particularly postal accounts, attractive because of their high rates. They, however, tend to require higher opening balances or have other restrictions. A tax-free Tessa account is another option.

The instant-access accounts listed for Yorkshire, Birmingham Midshires and Portman (those without a 'P' designation) can be opened with pounds 100. With societies requiring opening balances of at least pounds 500, you may still be able to reduce your balance to pounds 100 but keep the account open.

q The stamina to visit the societies. Fortunately it is the big high- street names - in particular, the Woolwich and Nationwide and the Alliance & Leicester - that are considered favourites to produce windfalls. Speculators are probably best-off going to a branch to open an account because of the onerous proofs of identity demanded.

q Patience. Not all societies will produce windfalls, and those that do may require you to tie up money for years. Mr Thomas at UBS believes that, at the most, only one or two of the societies in the table will announce big windfalls in the next year. Even after a society has promised a windfall, it can take years to arrive.

There are other possible problems. Expect some society windfall offers to try to exclude recent savers. Also, once a deal is announced, you may feel you cannot touch your savings. Most windfall schemes look at your balance on a number of different dates to assess what you will get. Finally, do not expect competitive interest rates while the deal is going through.

But the potential gains make these pains worth enduring. Building society bonuses are a rare example of potentially high returns at low risk. Even societies that say they do not want to change their status are considering small bonus payments to customers. Bradford & Bingley, Britannia, and the smaller National Counties have flagged this idea. Payouts might amount to a few tens of pounds annually. Small beer compared with the serious windfalls but, in themselves, moves that could prompt full-blown changes of status and therefore bigger payouts.

Where to place your bets

Building society Possible windfall Accounts to open

Nationwide pounds 530 Cashbuilder

InvestDirect (P)

Woolwich pounds 690 Prime Gold

A&L pounds 590 Instant Access

Bradford & Bingley pounds 600 First Choice

Direct Premium (P)

Britannia pounds 630 Instant Access

Capital Trust (P)

Northern Rock pounds 500 Go Direct

Bristol & West pounds 390 Select

Asset (P)

Yorkshire pounds 740 Cash Key

First Class (P)

Birm Midshires pounds 400 Quantum Instant

First Class (P)

Portman pounds 520 Instant Access

(P) postal account

Sources: UBS (windfall figures), Moneyfacts