Building Societies (Joint Account Holders) (Hansard, 17 January 1995)

§ Mr. Douglas French (Gloucester)

I beg to move, That leave be given to bring in a Bill to secure the rights of second-named account holders in Building Society joint accounts; and for connected purposes. The Bill addresses the problem which arises whenever there is a takeover or merger by a building society which involves a bonus payout to members. It applies currently in the case of the takeover of the Cheltenham and Gloucester building society by Lloyd's bank. It will apply in respect of the proposed merger of the Halifax building society and the Leeds Permanent, and any others that may follow.

The combined effect of schedule 2(7) and section 100(9) of the Building Societies Act 1986, is that any distribution of bonus to savers who have investment accounts—that is, members who hold shares in the society—can be made only to a sole account holder or to the first-named person of a joint account, and in both cases only to those who have invested continuously for two years.

The requirement to have invested continuously for two years is a very wise provision, because it seeks to reward loyalty for long-term saving and not to reward those who open accounts in anticipation of a takeover and a windfall cash distribution.

The restriction to first-named joint account holders, however, discriminates against categories of saver who ought to be entitled to benefit. The most unfairly treated category of all is widows who have had a joint account with their husbands and whose husbands die during the qualifying period.

The husband's name may be deleted from the existing account, or the balance may be transferred to a new account in the widow's name only. Either way, the counting of the two-year qualifying period has to begin all over again. It makes no difference how many years previously the wife has contributed to the account: she gets no credit for it, because it is deemed to be in her husband's name.

The problem is well illustrated by my constituent Mrs. Wiltshire, of 52 Mayfield drive, Hucclecote, Gloucester. As long ago as 1964, she opened an account with the Cheltenham and Gloucester in her first married name of Mrs. Wellington. In 1966, her first husband having died, she remarried, and her account was amended to the name of Mr. and Mrs. Wiltshire.

Sadly, Mr. Wiltshire died in 1993, and the account was transferred back to Mrs. Wiltshire's sole name. She is therefore a continuous saver of more than 30 years' standing, but she does not qualify for a cash distribution under the C and G takeover, because she was not the first named account holder for two years prior to the qualifying date—in this case, 31 December 1994.

The same problem arises with newly marrieds. A single woman who has a building society investment account may on marriage choose to redesignate the account jointly in the name of her new husband and herself. By doing so, she loses the rights that may have accrued to her when the account was in her own name. Her new husband must 586 begin the two-year qualifying period in his name alone. A similar disadvantage can arise in cases of divorce, when a woman must reopen an account in her name alone.

Those examples show that the 1986 Act unwittingly enshrined a degree of sex discrimination. It is virtually always the woman, whether a widow or newly wed, who suffers, because the normal convention in the English language is to designate an account Mr. and Mrs. To open an account using Mrs. and Mr. would be thought rather odd. Consequently, the woman is invariably the second-named account holder and cannot accrue any rights in relation to a two-year qualifying period while she remains the second-named person.

That problem has been much in the news recently, but it is not new. It was identified as early as 1988, when the Abbey National building society decided to convert to plc status. In making share allocations, the Abbey National found that it was precluded from conferring any benefit on second-named account holders. Six years later, that problem remains unresolved.

My hon. Friend the Minister of State, Treasury is well aware of the problem, and I pay tribute to him for the tune and trouble he has taken to consider possible solutions. He is currently engaged in a full review of building societies' powers, and hopes to present a range of measures in due course. The trouble is, as my hon. Friend pointed out in his letter to me of 14 December 1994, that he sees little possibility of bringing forward any legislation before 1996—and even then, the 1986 Act's takeover provisions are not his prime concern. My Bill singles out for earlier treatment one point that must surely be perceived as an injustice by whoever considers it.

The Bill does not attempt to tackle every related problem. For example, individuals who switch from a deposit account to a share account during the qualifying period also exclude themselves from any entitlement—but that is a more complex matter, which falls outside the Bill's scope.

In my opinion, the flaw in the 1986 Act was to assume that eligibility for bonus payments must be based exclusively on voting rights. Second and subsequent joint account holders were not given voting rights, because members could then have exercised multiple votes simply by adding extra names to joint accounts. That is why only one vote attaches to one account. However, exclusion from voting need not in every case be accompanied by exclusion from bonus entitlement. One bonus payout should attach to each account where either the first named account holder or a second or subsequent account holder meets the two-year qualifying period for continuous saving.

If my Bill becomes law, it will be for the Cheltenham and Gloucester to decide whether to take advantage of the legislation to benefit its members. A vote on the takeover's current terms is due at the end of March, and the two-year qualifying period ended on 31 December 1994. It would be open to the C and G to make the operative date later. It has already postponed it once, and could do so again. I hope that the society will so decide. In any event, the Bill protects against a similar problem arising in future takeovers.

The Bill does not attempt to change the two-year qualifying period or to give joint account holders more than their fair share or to alter voting rights. All it does, by two small amendments to the Building Societies Act, 587 is give credit for the savings record of the second-named account holder, and by so doing, fairness and justice to thousands of people. I commend it to the House.