News 2003 “Mutuality the way Ahead”
December 2003 – Click here for speech by Steve Huxham spokesman for the Investors’ Association at conference on mutuality arranged by the BSA and Mutuo entitled “Mutuality the way Ahead”.
Is Your ISA a Rip Off?
December 2003 – Click here to view Daily Mail report which states “Savers are being ripped off by poor-paying tax-free cash mini ISAs, with the worst paying around a third less than the best”. The best is Cheshire BS 1st & 2nd Issue (closed account). The worst is Northern Rock Instant Access.
Nationwide Building Society
December 2003 – Richard Handover a non-executive director has been in the news again. He was co-opted to the board in May 2000 but did not appear for election until July 2001. He was described by the chairman as the kind of executive that is needed for an £85 billion business and members were told that his advice could save the society millions of pounds.
Mr Handover has been chief executive of WH Smith since 1997 and in breach of corporate governance standards for best practice is now chairman of that company. Following the continuing decline in share price WH Smith was described by one city analyst as “a business which seems to permanently disappoint” The Daily Telegraph City Comment states “his reign has been marked with disappointments and gaffes though his own pay packet has expanded nicely throughout”.
The Sunday Telegraph reports that there are now concerns that the company’s IT and distribution systems are having problems and that the company had “forgotten” that it owned a building and a multi-million pound provision was needed to sort out the matter. The report’s forecast for the company is dismal and as competition increases this might lead to a bleak Christmas for the shareholders of WH Smith but not for Mr Handover. “WH Smith has been one of the worst performing retail stocks this year, with shares falling by almost 12 per cent since the start of the year, compared with a 24 per cent rise in share prices across the sector”.
Our Comment – It is difficult to share the Nationwide chairman’s opinions of Mr Handover. See also Nationwide below.
The Cost of Loyalty
December 2003 – Click here to view Mail on Sunday report which says banks and building societies have “grabbed up to £600 extra profits per borrower by holding back rate cuts to homeowners on standard variable mortgages over three years”.
Portman Building Society
November 2003 – Portman BS has threatened to sue Mutual Members founder TimTanner The threat is described as ‘brutally heavy handed’ by Financial Mail lawyers and centres on Portman’s chief executive – 54 year-old Robert Sharpe and allegations surrounding his affair with 27-year-old blonde Cheryl Binnis, a graduate employee who has achieved rapid promotion at Portman.
Click here to view Mail on Sunday report on this subject.
The relationship was revealed following an anonymous letter to the BSMA. See Portman below.
Click here to see Mail on Sunday report in January 2003.
More Tricks of the Trade
November 2003 – Click here for another Daily Mail report on methods being used by banks and building societies to make savings accounts look more attractive than they are. The article highlights the poor returns on notice accounts. See also “Tricks of the Trade” below.
Mortgages
October 2003 – BBC 2 Money Programme reports that average house prices are six times average incomes and well above expert forecasts. The increase in the cost of houses is being fuelled by mortgage lenders who are encouraging people to lie about their incomes through self-certification in order that they can obtain larger mortgages. The result is a vicious circle and prices continue to rise. For such a major impact on house prices this illegal practice must be extensive throughout the industry.
Notice Accounts v. Instant Accounts
October 2003 – Click here for Daily Mail article showing that savings rates on the overwhelming majority of notice accounts are inferior to those paid on instant access accounts.
Tricks of the Trade
October 2003 – Click here for Daily Mail article on methods being used by banks and building societies to make savings accounts look more attractive than they are. See also “Savings Rates – Dodgy Tricks” below.
Staffordshire Building Society
September 2003 – Members vote overwhelmingly for takeover by Portman. Click here for Investors’ Association comments.
Clay Cross Building Society
September 2003 – Members vote overwhelmingly for takeover by Derbyshire.
Skipton Building Society
September 2003 – After three years the directors have at last conceded defeat on the issue of compensation for members who held TESSA accounts. This follows the Ombudsman’s decision that Skipton was not justified in paying better interest rates on ISA accounts than on TESSA accounts. However, the directors are not going to give in easily and will only compensate those members who complain.
Our Comment – If you held or hold a TESSA account with Skipton be sure to check with the Ombudsman to see if you qualify
Harpenden Building Society
August 2003 – This small society has ceased to subscribe to the Banking Code (the industry’s voluntary code of good conduct). Note: Century and Penrith also do not subscribe.
Portman & Staffordshire Building Societies
August 2003 – The payout to Staffordshire members to persuade them to support the takeover by Portman is reported to have been increased to an average of £350 rather than the £100 originally suggested by the societies.
Savings Rates – Dodgy Tricks
August 2003 – The Daily Telegraph reports that savings rates are at their lowest levels since 1874 and societies are using “dodgy tricks” on savers to make rates look better than they are. An example used is Scarborough where a new “best buy” account is at 4% gross but drops to 3.4% after 6 months and to 0.2% if more than 3 withdrawals are made in 1 year.
To keep pace with the Retail Price Index higher rate taxpayers need a gross return of 5.2% and basic rate taxpayers need to earn 4%.
Fat Cats
July 2003 – The Guardian reports that average boardroom pay continues to increase at an ever greater rate. The average in 2002 was 23%.
Our Comment – That was not enough to satisfy the greed at Nationwide where the increase was 58%. Nevertheless that received the blessing of voters who were rewarded with yet another cut in savings rates and which are now at an all time low.
Nationwide Building Society
July 2003 – Alan Debenham and Tim Tanner increased their share of the votes to nearly 40%. Click here to view the webcast recording of the AGM through the Nationwide web site.
Moneyfacts
July 2003 – Moneyfacts Magazine’s 6 monthly survey of 44 mortgage lenders (banks and building societies) based on total interest paid on a £100,000 standard variable rate mortgage gives top spot to Egg followed by HSBC. Nationwide BS comes third and Abbey National last. The difference between first and last position is £1254.
Manchester Building Society
July 2003 – Manchester BS has bought the customer base of First Advice the financial services arm of The Accident Group’s parent company, the Amulet Group.
Nationwide Building Society
June 2003 – The Fat Cats are at it again – the chief executive’s pay has increased by 58% over the previous year to £838,000
The finance director of this so-called “mutual” society that does not perform particularly well for its members decided to leave in April and received a present of £890,000 giving him a grand total for the year of £1,435,000.
Interest rates for savers have been regularly reduced to levels well below those of banks in the same period even though there has been no reduction in the bank base rate. Some accounts pay only 0.5% gross.
Our Comment – The directors’ claim to be “Putting Members First”!!
Please be sure to vote against the pay rises.
Derbyshire and Clay Cross Building Societies
June 2003 – The Derbyshire BS is to take over the Clay Cross BS. Clay Cross is currently 63rd on the scale out of 65 societies. This will reduce the total societies left at end of 2003 to 63. Derbyshire is expected to close its Clay Cross branch.
West Bromwich Building Society
June 2003 – If you are a member of this society you will find that the chairman is offering to do all the voting for you. They are offering a “Quick Vote” to save you all the strain of putting crosses on the form. You will not even have to place a cross in the box that they have hidden in the small print on the back of the form. The directors are so thoughtful.
Portman & Staffordshire Building Societies
June 2003 – The Portman BS is to take over the Staffordshire BS. Staffordshire chief executive Bill Snaith and chairman Robert Yates are to join the Portman Board increasing the number of board members to twelve. This reduces the number of building societies to 64.
Our Comment – Qualifying members of the Staffordshire are expected to receive a small sweetener of £100 to lubricate the path to the takeover so that another society will disappear by mutual consent.
Despite the claims of the Portman’s board to be committed to their branch operations they still continue to close branches
Murray Financial
June 2003 – Ken Murray the man who founded the business to buy building societies and tried to takeover the Leek BS has resigned and is involved in a boardroom row over a pay off of £800,000.
Equitable Life
May 2003 – All of the non-executive directors of this struggling mutual society received a fat cat pay increase of 50% last year!
Our Comment – The society is only just about solvent and members have had to take a number of severe cuts to their pension funds to keep the society afloat. But the directors believe in raiding the till not sharing the pain.
The Good, the Bad and the Ugly
May 2003 -Article in thisismoney (7 May) on interest rates of mutuals v. banks
BSA
May 2003 – The Director-General of the Building Societies Association says “There is now no doubt that mutual institutions do genuinely want to listen to their members – and act on what they hear”!
Our Comment – Really?
Portman Building Society
May 2003 – Following an anonymous letter to the BSMA questions were asked at the AGM by Tim Tanner concerning an affair between 54 year old Robert Sharpe the Chief Executive and 27 year old manager Cheryl Binnis. The letter states that her rise up the managerial ladder has been quite spectacular compared with other personnel who have taken up to twenty years to reach similar positions. It was claimed that she was inappropriately involved in boardroom meetings to the annoyance and discomfort of fellow directors.
The chairman confirmed that he was aware of these activities but refused to discuss the subject with members and cut off Tim’s microphone as they do at “mutual” societies.
The story was given full page three publicity in the Daily Mail on Saturday 3rd May.
Tim obtained a very good result of around one third of all voting members’ support from the elections and this despite all the chairman’s proxy votes that are shared out among the directors.
Robert Sharpe has come under fire for his fat cat salary increases and faced calls for his resignation following branch closures.
Fat Cat Pay Increases
April 2003 – Listed companies including banks now face shareholder scrutiny over boardroom pay increases but building society directors deny members the same rights and continue to award themselves massive pay rises and pension benefits.
Derbyshire’s Peter Richardson received a 16% increase to £275,000 and Skipton’s John Goodfellow received a 12.3% increase to £428,000. Neither of these societies performs well for savers.
All but 3 of the 65 building society boardrooms paid themselves increases averaging 7% and twice the rate of inflation.
How do these increases compare with performance? A Moneyfacts report in October last year showed the average savings accounts paid a staggering 0.49% gross and rates have tumbled since then.
Financial Services Ombudsman
April 2003 – Directors of banks and building society have been lobbying, through their trade organisations BBA and BSA for tighter controls to weaken the powers of the independent ombudsman service. This came about through some decisions made by the ombudsman, which attracted considerable adverse media attention for societies.
Britannia Building Society
April 2003 – This major society has at long last started calculating mortgage repayments on a daily rather than a yearly basis.
Portman Building Society
March 2003 – The AGM Notice contains the “Board’s Response” to Tim Tanner’s election address. Needless to say the response contains a number of questionable statements and is typically unmutual in ensuring that Tim Tanner is unable to respond and correct misleading statements.
However, Tim has been successful already through making the board remove the hidden opt out tick box from the reverse side of the voting form and place it on the front. Even so this box is not for the benefit of members.
You can find Tim’s response to John Roques’ response by clicking HERE.
Tim also tells members of all societies they must make their voices heard. Act now, take the trouble, make the time, it costs nothing – click HERE.
Nationwide Building Society
February 2003 – Nationwide plans to install a new security system described as a biometric signature verification system. It is intended to provide a more secure method of signature verification than the current visual method. Nationwide hopes that the new system will not only provide greater security but also reduce the amount of paper used and improve efficiency within its filing and retrieval methods.
Nationwide has previously been involved in experiments with an iris recognition security system but there has been no further news on this. The cost of the experiments was never reported to members. The report states that the new system has been tried and tested and is being installed in phases but again there is no mention of cost.
Best Buy Accounts
February 2003 – A survey carried out by the internet bank Egg, on the 141 bank and building society savings accounts that have appeared in “best buy” tables over the last 5 years, shows that 53 remained in the tables for less than one month and 74 for two months or less. The average life of a “best buy” account is put at 4.2 months.
Short term “bonuses” are a common method used to gain entry into best buy tables following which the interest rate drops dramatically.
Our Comment – Beware of claims made by societies on the number of times their accounts have appeared as “best buys”.
Portman Building Society
January 2003 – All of the resolutions for improved accountability and governance submitted to the board by Mutual Members have been rejected as illegal and without any explanation.
Our Comment – This is yet another demonstration of the industry’s opposition to members rights and another nail in the coffin of mutuality. Please click here to see the resolutions that were rejected and see the Portman voting form for last year.
Mortgage Indemnity Guarantees
January 2003 – A report by Savills Private Finance, one of the industry’s largest mortgage brokers, condemns the continued practice by the majority of building societies to use Mortgage Indemnity Guarantees (MIGs). These are insurance policies that are paid for by borrowers but only protect lenders. MIGs are described by Savills as ‘an unnecessary evil in this day and age’.
MIGs hit those who can least afford this insurance such as first time buyers who have to struggle to raise a 5% or 10% deposit. Savills’ ‘name and shame report’ shows that some lenders such as Lambeth BS impose a MIG even when a borrower has a deposit of 25%. Many borrowers fail to appreciate that a market-leading headline rate with a MIG may be less competitively priced than a product with a higher headline rate without a MIG.
Nationwide Building Society
January 2003 – Richard Handover, chief executive of W H Smith, non-executive director of the loss making Post Office and non-executive director of Nationwide, which lost £40,000,000 on bad investments last year, is to become one of the highest paid postmen for a week. It is reported that all directors of the Post Office will in future have to spend a week on the shop floor and delivering mail to learn the business.
January 2003 – The Higgs inquiry report (pdf file) on the role of non-executive directors states that almost half of the non-executive directors surveyed were recruited through personal contacts or friendships. Only 4% had a formal interview and only 1% obtained their job through answering an advertisement.
Recommendations include – boards should be more open minded on recruiting and should not insist on previous board experience. Non-executive directors should be truly independent, should have complimentary skills, should make a greater commitment to their work and should receive ongoing training. The report also calls for a senior non-executive through whom shareholders would have a direct channel of communication.
TESSAs
January 2003 – Moneyfacts Magazine’s annual survey on TESSA savings accounts of 87 banks and building societies shows that Leek United BS gave the best return followed by Earl Shilton BS and Holmesdale BS. Nationwide BS the largest building society only managed 37th place. At the bottom was Manchester BS.
Low Interest Rates
January 2003 – The Consumers Association estimates savers are losing £5bn in interest by leaving their money in low paying accounts. According to the CA the worst building society interest rates on £1 are:
Chesham BS (30 Day) 0.1%
Dudley BS (instant access) 0.1%
Leek United BS (instant access) 0.1%
Loughborough BS (instant access) 0.1%
Newcastle BS (instant) 0.05%
Staffordshire Building Society
January 2003 – A former director, Andrew Thompson, has been charged with fraud and theft from the society.
Scarborough Building Society
January 2003 – A former director, Gerald Waterworth, was sentenced to 18 months in jail this month for theft from the society and from a Citizens’ Advice Bureau.
Portman Building Society
January 2003 – Mutual Members action group has submitted over 700 forms to the Portman calling for the resignation of the chief executive because of the way members have been treated.
A report in the Mail on Sunday (www.thisismoney.com) criticises the chief executive for the way he has treated members.
Our Comment – In keeping with their normal practice with members’ resolutions the Portman will now be very busy seeking ways to reject all of the forms and the resolutions.
Reduction of Savings Interest Rates
January 2003 – Some building societies have reduced interest rates on savings accounts from December 31st even though the bank base rate remains unchanged. Among those wishing happy new year reductions are the Newcastle and Coventry. These changes are in addition to previous reductions on savings rates of both societies since the last base rate change.