Your Money: Societies keep profit in mind

YOU MAY loathe and detest your high-street bank. But do not labour under any illusion that building societies are altruistic. They will tell you, of course, that rising profits mean a strong institution and security for depositors. But healthy profits also deliver healthy pay packets to the directors.

A Barclays Bank teller complained bitterly to the offices of the Independent on Sunday this week that his bank's customers are suffering because of the penny- pinching antics of building societies. He was unable to give Barclays clients due care and attention, he claimed, because he was spending so much time changing small coins for people who bank with building societies but are refused this service.

Theoretically, Barclays now charges non-customers for this type of transaction, but the whistle-blowing member of staff says that many tellers are reluctant to demand the fee because they fear abuse.

Building societies have been quick to identify the expensive aspects of banking services and have ruthlessly avoided them. Some leading societies have not been at all shy about introducing charges on small balances. And investors at the Cheltenham & Gloucester are witnessing a development which, if adopted widely in the industry, could make a big difference to the character of societies if not their balance sheets.

C&G has launched a new postal-operated account paying up to 10.2 per cent gross. However, investors in it become depositors rather than members. They have no voting rights so do not need to receive invitations to annual meetings nor all the other (expensive) documents a society is obliged to send to members. C&G, which tends to be a trend-setter, argues that most people are apathetic about their membership of a building society and would rather have a higher rate of interest than a say in the institution's affairs.

Maybe. But a society that attracts a large number of deposit accounts is eroding its status as a traditional 'mutual' institution run - in spirit, if not in practice - by the members for the members. In fact, it is illegal under the Building Societies Act for a society to have more than half its retail funds tied up in deposit accounts.

At that point, the Building Societies Commission would ask it to redress the balance or consider converting, to become . . . a bank.

IF THE renewed warnings about the possible scrapping of free banking are encouraging you to look to a building society for a current account, take care in how you organise the switch. Yesterday's Independent carried a horror story about a man whose mortgage-protection policy has lapsed after a mix- up. It appears this was at least partially due to switching direct debits from one bank to another.

Direct debits have their attractions. But one of the main reasons why banks promote them so enthusiastically must be the in-built deterrent to switching them. Since they are not originated by the bank, account-holders have to communicate separately with each company collecting debits from their account.

Opening a new bank account these days normally means going through an elaborate form-filling and credit-vetting procedure. Credit-scoring techniques are finely tuned to individual bank and building society requirements and there is no guarantee that you will pass muster with the institution you have chosen for your current accounting affairs.

It is not advisable to close a bank account in high dudgeon before opening a new one. Before you write that last letter of disgust, make sure you have received all the appropriate plastic cards you require and that all debit and credit orders are in place.

INSURANCE companies and unit trust managers are feverishly trying to develop investment packages that offer some sort of protection against market falls. Blue- blooded stockbroker Cazenove has already devised a scheme which offers investors in its American trust a potential refund. This comes good if the Standard & Poor's 500 Index falls by more than 10 per cent. But if the index stays the same and the fund falls, there is no refund.

Cazenove will no doubt ensure that potential investors understand the distinction. But regulators will need to keep an eye on the marketing literature associated with any boom in protected schemes - they realised that with-profit bonds were being oversold after many people had already piled in.

Vivien Goldsmith is on holiday.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
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.

iJobs Job Widget
iJobs Money & Business

Sheridan Maine: Accounts Assistant

£30,000 Annual: Sheridan Maine: A fantastic opportunity has arisen for a perso...

Richard Bishop: Accounts Payable Clerk

£11 - £13 Hourly Rate: Richard Bishop: Are you looking for a purchase ledger r...

Jemma Gent: Management Accountant

£250-£300 Day Rate: Jemma Gent: Are you qualified accountant with previous exp...

Richard Bishop: Accounts Payable Clerk

£11 - £13 Hourly Rate: Richard Bishop: Are you looking for a purchase ledger r...

Day In a Page

No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor