BSA: Newsbite – March 2007
MPs back Financial Mutuals Bill
A Parliamentary Bill which would affect building society funding limits and the rights of investors was backed by MPs last Friday (23 March 2007). The Bill also proposes to make it easier for different types of financial mutuals to merge.
The Financial Mutuals Arrangements Bill was approved in principle by MPs at the end of the second reading debate. It will now go through its committee stage, when the details of the proposals will be scrutinised by a committee of MPs.
The legislation was proposed by Sir John Butterfill MP, who has been a long-standing supporter of the mutual sector. Sir John came seventh in the ballot for back bench MPs to propose a Private Member’s Bill. This can be on any subject of the MP’s choosing.
During the debate Ed Balls, Economic Secretary to the Treasury, told MPs that building societies “can achieve advantages in efficiency and innovation and operate with lower costs than plcs”. He added “some mutuals, particularly small mutuals, including small building societies, serve markets that are often ignored by plcs, and can therefore develop local knowledge and engagement that is harder for larger organisations to achieve. That can lead to a third advantage, building local loyalty and making a special contribution to local and community life”.
Lost Accounts – BSA backs Government Consultation
The BSA has given its backing to the Government’s consultation on how best to use money lying forgotten in lost accounts (often called unclaimed assets).
The idea to reinvest unclaimed assets in the community was first proposed by the Chancellor in the 2005 Pre-Budget Report. Since then, the Government has been in talks with banks and building societies as to the best way of taking the idea forward.
The consultation (published 19 March 2007) proposes that a voluntary scheme should be set up. This would see money from forgotten accounts, which have not been touched by a customer for 15 years, transferred to a central reclaim fund. The money still remains the property of the person who invested it, or if the person dies, by a rightful claimant. They will be able to reclaim the money directly from their bank or building society. The fund will bear the financial risk of repaying the customer.
A Budget to Reward Savers
On 21 March Gordon Brown stood up to deliver what is widely tipped to be his last Budget as Chancellor.
ISAs
In a Budget to “encourage and reward saving”, cash ISAs received a welcome increase in the annual subscription limit to £3,600. The cash ISA has undoubtedly been a success story to date and raising these limits will help build on this. Taking this a step further, the BSA would like to see regular future reviews of limits – to prevent erosion by inflation.
Carbon emission reduction and energy efficiency
The Chancellor also announced measures to increase energy efficiency of homes, targeted at pensioners and low income families, these are a welcome first step. Given the impact of carbon emissions from households on the environment (which account for over a quarter of UK emissions) we look forward to a dialogue on how to encourage existing property owners to improve the environmental performance of their homes. This would ensure a real step change in combating climate change.
Societies dominate Moneyfacts ISA Survey
Building societies took 16 of the top 20 places in the Moneyfacts annual ISA survey – up from 12 of the top 20 places last year.
Commenting on the survey, Adrian Coles, Director-General of the BSA said “Year after year we see building societies dominating these types of surveys. As mutuals, building societies do not have to pay dividends to shareholders and therefore can offer highly competitive, long-term value to their members – as is demonstrated in this Moneyfacts survey.”
The survey uses the projected value of mini cash ISAs as at 5th April 2007, assuming that the maximum investment of £3,000 was made on opening (6th April 2006), no withdrawals were made and all interest was compounded.
The Moneyfacts annual ISA survey can be viewed here
Society News
Scarborough Building Society to buy Portman’s Guernsey based deposit-taking business
Scarborough has agreed to acquire Portman’s Guernsey based offshore deposit-taking business Portman Channel Islands Limited (‘PCIL’). PCIL has a geographically diverse deposit book of circa £600 million and approximately 8,000 customers.
The transaction is expected to be completed by the end of April 2007, subject to the necessary regulatory approvals.
Following completion of the transaction, PCIL will be rebranded and will, subject to approval, continue trading as Scarborough Channel Islands Ltd (‘SCIL’). Scarborough has confirmed that PCIL’s existing management team and staff will continue in their roles and will be instrumental in the development and expansion of the business.
A first in the building society sector
The Shepshed Building Society is believed to be the first building society to have, simultaneously, a female Chairman and female Vice Chairman.
BSA welcomes two new Associates
Sterling International Brokers Limited and Bank Machine have joined the BSA as Associates. To find out more about them, check out their websites..
Sterling International Brokers Limited
Bank Machine
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