Better Together – The Growing Strength of Mutuals in the UK
25.10.2018 by Jim Ker
Mutuals are going from strength to strength in the UK, where more than 1 in every 3 UK citizens is a member of at least one mutual, accounting for £100 billion in revenue every year.* Whilst some big names in finance have struggled, the mutual ethos seems to have struck a chord with British consumers who are looking for greater transparency when making investment choices.
The mutual foundations of trust, shared benefit and ownership provide a refreshing alternative to companies that put profit above all else. A Mutual is a financial organisation run entirely for the benefit of its Members. That’s all. When a Mutual Society makes profits on investments, these are shared amongst its Members, as bonuses, or reinvested to benefit them further. A Mutual has no shareholders to pay out.
Returns: Over the long-term, Mutuals seek to provide better returns than Private Limited Companies. With no shareholders to cream the top off investment returns, this can be achieved without taking undue risks with the Members’ money.
Trust: Safe in the knowledge that Mutuals are responsible only to their Members, research conducted by the AFM found that people are far more likely to recommend a Mutual organisation than a Private Limited Company (PLC).
Happy Members: Mutual societies report higher customer satisfaction levels than other banking organisations, feeling that staff work harder when working in an organisation owned by their customers.
Having your say: As might be expected in an organisation owned by its Members, Mutuals tend to focus heavily on making it easier for their Members to do business with them and have a say in how the organisation is run. There are many ways to have your say as the Member of a Mutual such as feedback, member panels or attending their AGM.
Benefits for the Economy: According to the Association of Financial Mutuals (AFM), Financial Mutuals play an important role in maintaining stability in the UK economy. The presence of a stable Mutual sector applies competitive pressure on profit-seeking PLCs. This pressure buffers the UK economy from seeing such large fluctuations, should the stock markets experience significant peaks and troughs.
Tax-Exempt Savings: People can save up to a maximum of £25 / month (or £270 / year) tax-free with Friendly Societies in a Tax Exempt Savings Plan. This is in addition to your Individual Savings Account (ISA) allowance. These Tax-Exempt savings schemes are specific to Friendly Societies and are available to both adults and children. Learn more about our Tax Exempt Savings Plan or TESP here.
Protection: Mutual societies are regulated by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA). Additionally, they are covered by the Financial Services Compensation Scheme (FSCS) that offers protection to members savings should the institution Fail.