Hinckley cuts reassure its savers

By STEPHEN WOMACK, MAIL ON SUNDAY PERSONAL FINANCE CORRESPONDENT
Updated: 18:03 EST, 20 March 2010

The challenge of rewarding savers and keeping the books balanced in an era of low interest rates will dominate this year's season of building society annual meetings. More than 30 societies will hold their annual meetings over the next two months, giving thousands of members the chance to have their say.

Hinckley and Rugby kicked off the season on Wednesday morning with its 144th annual meeting. A dozen members and some staff gathered in the boardroom of the society's main office in Hinckley, Leicestershire, for the meeting.

The society has 11 branches and 70,000 members concentrated in its Leicestershire and Warwickshire heartland. Unlike others, it has not expanded into risky commercial mortgages or developed estate agencies or financial services businesses.

Savers Alison and Richard Roberts at the society's annual meeting 

Chairman Nigel Frostick told members that focusing on secure, residential lending had allowed the society 'to remain in good health despite testing market conditions'.

New mortgage borrowing slumped to only one third of the level in 2008, while the income the society received on its reserves also fell sharply.

Hinckley and Rugby recorded a profit of only £280,000 last year, compared with £1.26 million for the previous 12 months, but there was pain along the way.

The society made eight of its 86 staff redundant and closed its final salary pension scheme, stopping members from building up further years of service. The board took a pay cut, too, forsaking bonuses that they were entitled to. Chief executive Christopher White's remuneration fell nine per cent to £178,000.

Responding to a question at the meeting, Andrew Astin, chairman of the society's remuneration committee, said: 'This year we felt it was imperative to review board

salaries in light of the loss of interest that our saving members have suffered.

'Irrespective of how individuals have performed, it was not the right year to award salary increases.'

This answer went down well with savers Alison and Richard Roberts, who were attending their first annual meeting.

Alison, 69, a retired accounts clerk, said later: 'It's good to see they understand what members are worried about.' Richard, also 69, a former engineer, said: 'We're concerned about low interest rates on our savings and we thought we'd come along and hear what is happening from the top table.'

Richard asked the board about the possibility of a merger with another society to save on costs.

White replied: 'We have to work in the best interests of members, so we would never say never about a merger. As we sit here today, it is a remote possibility. We are not aware of any attempts to take us over, nor are we in any active discussions with anyone.'

Richard and Alison, from Sharnford, Leicestershire, are also members of Earl Shilton and Coventry building societies and plan to attend Coventry's annual meeting next month.

'I think local people should invest with and support local societies,' says Richard.

Retired chemist Martin Sparks, 68, is a regular at the annual meeting. He is a long-term saver with the society and was previously a member of Rugby Provident Building Society, which merged with Hinckley Permanent in 1983.

Martin, who lives in Rugby, says: 'I like the mutual ethos. I think there is greater trust in an organisation that is not run to profit shareholders.'

He asked the board about the impact of its payments to the Financial Services Compensation Scheme. This has seen building society members bear a disproportionate slice of the costs of bailing out customers of Bradford & Bingley and failed Icelandic banks.

Hinckley and Rugby has already paid more than £500,000 to the FSCS and in the worst case is estimating that its members may have to pay another £1.5 million.

Martin, who also sits on the society's members' panel, believes these payments are unfair to members, taking money that would otherwise be paid as more generous interest rates.

White told the meeting: 'We and the Building Societies Association are pushing hard for future reform. Unfortunately, we have to live with the legacy of the decisions that were taken about rescuing banks in the heat of the crisis.'

Despite a lively question-and-answer session, the meeting ended just after

10.30am, allowing Hinckley and Rugby to keep a promise.

The chairs that members used for the meeting had been borrowed from nearby St Mary's Church of England Primary School and had to be returned by 11.30am to be set out for the pupils' lunch.

•• Ipswich Building Society will hold its annual meeting on Wednesday at 7pm at Wherstead Park, Wherstead, Ipswich.