The runaway gravy train of the building society rolls on

Bonanza: Skipton CEO David Cutter

Some of the country’s building society bosses have been enjoying staggering pay rises while customers continue to earn pathetic interest on their savings.

The exclusive study released today by The Mail on Sunday shows that 13 company CEOs have received double-digit or more pay increases for 2021.

By far the biggest accolade went to David Cutter, Skipton’s longtime boss, who saw his total 2021 financial package increase by almost 103 per cent to £1,309,000. This was primarily the result of being awarded a £622,000 performance bonus on top of his £599,000 base salary. In 2020, Cutter retired from the bonus program. He will step down immediately following the Company’s annual general meeting on April 25th.

Six other CEOs of the company received six-figure bonuses last year. These include the bosses of corporations much larger than Skipton (Coventry and Yorkshire) as well as those a fraction of its size. For example, Mark Bogard, who received an annual bonus of £115,000, is responsible for Family Building Society, which is a tenth the size of Skipton and operates just one branch in Epsom, Surrey.

Cutter’s bonus was primarily the result of booming profits from Skipton’s savings and mortgage division. Last year Skipton made a total profit of £271.8m compared to £118.8m the year before – with savings and loans accounting for 87 per cent of profit.

These profits result from the difference between the interest on the borrowers’ loans and the interest paid to the savers. The Bank of England’s interest rate has risen to 0.75% today from 0.1% in November. The MoS campaign Give Savers A Rate Rise calls on all banks and building societies to make savers a better offer.

Although Cutter’s “single variable compensation arrangement” for 2021 is based on a number of factors, including customer satisfaction and savings and mortgage growth, profit is the primary determinant. The more profit it makes above a predetermined target, the higher its Annual Incentive. So it’s in Cutter’s interest – and that of other Skipton board members – to keep interest saver payments in check.

In Skipton’s defence, Cutter’s financial rewards are for running a successful business – unlike Mark Hartigan, head of insurance giant LV, who received a £511,000 bonus last year despite agreeing to a proposed £530m sale of the company the US private equity firm Bain Capital had botched. Both Skipton and LV are mutuals owned by their members.

In addition, the North Yorkshire-based company pays more attractive savings rates than any major high-street bank. But the contrast between Cutter’s financial fortune and ordinary Skipton customers couldn’t be greater. For example, a saver with £10,000 in Skipton’s instant access account, Daily Saver, started 2021 with an interest rate of 0.15 per cent – in other words, a promise of £15 a year in interest on his £10,000 balance.

By the end of the year, the interest rate had doubled to 0.3 percent in response to an increase in the base rate from 0.1 percent to 0.25 percent. But still only the equivalent of £30 on a £10,000 savings balance that is constantly being ravaged by inflation. Today, the easily accessible savings account pays 0.55 percent. Cutter’s compensation for 2021 is £3,586 for each day of the year.

At The Family Building Society, a customer with a branch savings account started 2021 at 0.35 per cent interest on a balance of £10,000, which equates to annual interest of £35. By the end of the year the interest rate had fallen to 0.2 per cent (£20 annual interest) despite the increase in the base rate.


Although only 43 building societies are in business today, after many were left behind in the 2008 financial crisis, they still play a key role in providing a home for savers’ money. There are more than 23 million building society “members” – seven times as many borrowers. As members, customers are de facto owners of the company in the same way as the shareholders of a public company.

Together building societies manage around £454 billion in assets. To their credit, they often operate branches in communities that the big high street banks have long since abandoned.

They are also community oriented and often support local charities in the areas where they have offices. And they often take a more personal approach to credit decisions than the computer-controlled model of the big banks.

The MoS analyzed 35 reports and accounts for 2021 published by building societies so far. Only teachers with year-ends in December still have to publish accounts for 2021.

The other seven have later year-ends. That includes the nation’s largest building society, Nationwide, whose fiscal year ends tomorrow. His accounts for the year to 4 April 2021 show boss Joe Garner received a total of £1,236,000 in compensation – less than Skipton’s cutter last year. Skipton’s business is about a tenth the size of Nationwide. Details of Garner’s financial package for the year ending tomorrow won’t be announced for a few months, so it could swamp Cutter’s. He hands over the reins at Nationwide to former TSB boss Debbie Crosbie.

Details of the total remuneration of home savings managers – consisting of basic salary, any performance bonus, pension and other benefits (e.g. a car) – are listed in the table. Of the 35 whose compensation we examined, only four saw their 2021 financial package shrink compared to 2020. All but five of the 35 received annual bonuses ranging from Cutter’s £622,000 to the £9,927 Kevin Gray received as Bath boss. one of the smallest building societies in the industry. Among those not receiving bonuses were Harpenden’s Sarah Howe and Buckinghamshire’s Gerard O’Keeffe.

In the case of Howe, who resigned from her job last September, she and her finance colleague did not receive an annual bonus because the “breakeven point was not met.” Harpenden’s profit fell from £211,000 to just £86,000. O’Keeffe’s £187,000 in 2021 pay does not include a bonus, although a note in the accounts says £23,660 was paid for his ‘performance’ in 2021 last month. All but three of the 35 companies reported larger profits in 2021 than in the previous year. This suggests – quite clearly – that the vast majority of building societies have put profit restructuring and board bonuses ahead of paying better interest rates to savers. Along with Harpenden, Bath and Hanley Economic also saw earnings fall in 2021.


All members – savers and borrowers – of building societies can voice their concerns about excessive executive pay.

They can do this by voting against the Directors’ Compensation Report before the AGM – or at the meeting if they are willing to travel there. For companies that end the year at the end of December, most will hold their annual general meetings later that month. For example, Skipton’s meeting will take place on April 25, while Coventry, the country’s second largest society, will hold its annual general meeting three days later at the Coventry Building Society Arena.

Members of most building societies can vote before the general meeting – by post, online or via a branch. The voting deadline for Skipton is April 20 – for Coventry it is April 25.

The vote against the board remuneration sends a disapproving signal to the board, but it is nothing more. The vote is non-binding, meaning the Board does not have to act on it. Organizations such as the Bausparkassen-Members Association have long advocated subjecting remuneration to an annual binding vote.

It also believes that any bonuses paid to directors should be based on improved member benefits (e.g. higher savings rates) and not on the generation of greater profits.

Although members often oppose board compensation at annual general meetings, only a minority votes against the compensation report. For example, at last year’s Coventry AGM, only 8,326 voted against, compared with more than 96,000 who voted in favour. The corresponding numbers for Skipton were 4,787 and 58,082.

This suggests widespread apathy, but it’s not entirely true. Many customers use so-called “quick voting” when voting before a general meeting. This hands over their vote to the chairman of the company.

In the case of the Compensation Report, it means one vote for, not against. The BSMA has long called for a “ban” on speed dial, calling it “sneaky”.


On Friday, The Mail on Sunday called on both Skipton and The Family to justify the 2021 pay packages awarded to bosses David Cutter and Mark Bogard.

Skipton said the directors’ pay in 2021 reflected the group’s record performance, which included subsidiary Connells’ acquisition of real estate broker Countrywide. Cutter, he added, played a “central role” in the purchase and building the group for an “encouraging future.”

It confirmed that Skipton executives voluntarily withdrew from their 2020 bonus program – explaining the 102.6 percent increase in Cutter’s compensation for 2021.

Last year, Skipton paid an average savings rate of 0.65 percent, 0.37 percentage points above the market average. Also, all of his variable savings accounts are paying 0.50 percent or more after last month’s rate hike.

The family told the MoS: “We care deeply about savers but cannot influence the overall market, which is at historically low levels.”

Speaking of executive pay and the £115,000 bonus for 2021 paid to boss Mark Bogard, it says: “Executive pay is set independently of challenging targets to balance the needs of savers and borrowers in a competitive market and at the same time to offer growth, sustainability and outstanding service to our members.’

The Bausparkassenverband, the industry’s flag-waver, acknowledged that salaries and bonuses for executives are an “understandably sensitive issue”. It states that when deciding on executive compensation, companies’ compensation committees and boards will examine the level of competition and benchmarks within the financial services sector and balance the need for competitive compensation while staying true to the mutual values ​​of the builder society. Members are best served by talented leaders.”

In terms of savings, it said corporations had paid £2.4 billion more in interest to members over the past three years than they had received from accounts with major banks.

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The runaway gravy train of the building society rolls on

Source link The runaway gravy train of the building society rolls on

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