What Is A Mutual?
26.03.2018 by Jim Ker
Kingston Unity Friendly Society is a mutual – but what is a mutual? What are the benefits? Well, it’s all about members joining forces to get better benefits for all.
Most people have an awareness of building societies and co-operatives but may not associate them with being a mutual. Like ourselves (a Friendly Society) they share the common traits of what it is to be a mutual – they are all owned by their members and are run for their benefit. They don’t have shareholders to pay, so profits get paid straight back to their members through bonuses and benefits. It’s that mutuality that sets these organisations apart from the large corporate banks.
The mutual sector also includes many more different types of organisations like credit unions, clubs, housing associations and specialist bodies such as football supporter trusts and community mutuals. Even in the public sector, services such as the NHS Foundation Trusts, Leisure Trusts, Co-operative Schools and Community Housing Schemes are all mutuals so they are all owned and run for their members and with no shareholders to pay giving them the freedom to focus on what really matters; Their members’ needs.
A Brief History
Mutuality is certainly not a new concept, it has been around for hundreds of years and can even be traced back to Roman times.
Born out of one simple idea; everyone contributing to a mutual fund from which workers could receive support should they fall on hard times. Originally when someone was unable to work due to ill health or old age, the rest of the workers would collect coppers together to help them out in their time of need. In time, instead of collecting when necessary, contributions became regular so that money was already in the kitty when it was required.
Whilst the benefits of pooling money in such a way might seem logical and of benefit to society, Friendly Societies were perceived by some as decidedly less than friendly. Some were classed as illegal organisations or secret societies prior to 1793. Once the Government passed legislation relating specifically to mutual organisations, they began encouraging membership and by the late 1800s they began to represent specific trades and professions resulting in around 27,000 registered mutual societies in the UK.
Today the mutual ethos is as strong as ever, encouraging people to work together and take better control of their finances through member ownership, collective investment and member benefits. Many of the smaller mutuals have merged or closed. However, there are still 300 to choose from.
What are the benefits of being part of a mutual?
Excellent service – It is common for mutual societies like us to have a higher level of satisfaction than other banking organisations by delivering consistently better customer experience to its members. Our members are everything to us, and we aim for 100% member satisfaction by giving a personalised, friendly service. Because we don’t have shareholders to pay, our focus is on the needs of members and ensuring that they receive excellent customer service with very few complaints..
Have your say – Because they’re owned and run for their members benefit, members also have a say in how a mutual is run. Every year they can vote in the Annual General Meeting and help shape the future of the Society. Members will have the opportunity to vote on who makes up the Board of Directors and issues at the heart of the Society. Another way our members ensure their voice is heard is through our Member Panel. You can find more about how to become involved in the Member Panel here.
Trust and fairness – Mutuals have been providing financial and social support to their members for centuries. At a time when so many are losing their faith in banks and big financial institutions, consumers are looking for socially responsible and financially viable organisations like mutuals, knowing that their money is going to be safe and well looked after.
Well established – Some of the oldest mutuals have over 100 years’ experience and a strong, proud heritage of supporting their members and the communities in which they live – We’ve been looking after our members, their children and grandchildren’s money for over 175 years.
Beneficial for the economy – Financial mutuals apply competitive pressure on profit-seeking companies. So during times of financial crisis such as the recession, the stable mutual sector protects the UK economy from large fluctuations experienced in stock markets and the majority of their assets are reinvested in bonds, shares and property in the UK markets.
Tax Free Savings – As well as being able to offer tax efficient savings like ISAs and Junior ISAs, Friendly Societies are also able to offer Tax Exempt Savings Plans for both adults and children. You can save up to a maximum of £25 a month or £270 a year tax free on top of your ISA allowance. These plans have a minimum term of ten years, but many take out plans for far longer, such as 18 years to pay towards higher education. Some families take out a plan for each member in order to fund university fees with policies maturing in different years.
Protection – Mutual societies are authorised by the Prudential Regulation Authority (PRA) and regulated by the Financial Conduct Authority (FCA) and the PRA. They are also covered by the Financial Services Compensation Scheme (FSCS), which offers protection if they are unable meet their obligations, so if the worst happens and for some reason they were unable to pay you then you may be entitled to compensation from the scheme.
Stronger when we work together – Kingston Unity and many other mutuals are members of the Association of Financial Mutuals (AFM). The AFM is the professional, trustworthy, authoritative trade body, committed to protecting and progressing the principles of mutuality. They endeavour to promote a better understanding of mutuals, encouraging mutual support and mutual approaches to business and public policy.
The future of mutuals
Whilst the world has changed dramatically since the 1800s, the service offered by mutuals is as relevant if not more so than ever before. Particularly with the damaged reputation of a mistrusted banking industry and uncertainty over how the United Kingdom will fayre as it breaks away from the European Union.
Our aim during what is likely to be a further period of uncertainty is to ensure our members remain stronger as a group and retain access to the benefits they need when they need them most, remaining true to our heritage and traditions whilst also looking to the future with our members’ investment bonds, ISA’s and tax exempt savings schemes.