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MONEY BOX

Presenter: Paul Lewis

TRANSMISSION 6th OCTOBER 2001 1200-1230 BBC RADIO 4

Aggregation

Building Societies

Equitable Life

Stakeholder Pensions

Other News

LEWIS: Hello in today's programme high street banks reject a new service to make Internet banking service easier. Two building societies join branches but will the idea take root. Our reporter Chris A'Court is in Cardiff this week - Chris

A'COURT: Paul the equitable life survival road show has reached the Welsh capital , and I'm getting the latest update from the societies chairman Vanni Treves.

LEWIS:Thanks Chris. And small businesses and their staff give the thumbs down to stakeholders pensions.

MAN: We set up a pension scheme that I don't think is going to be used by my staff so it was to an extent a pointless exercise.

LEWIS: First though a new service to help people manage internet banking has run into difficulties just days after its launch. Money Box reported three months ago that Citibank was planning to offer a new service to allow people access to all their on-line accounts even those of rival banks through one internet site and one password. Well it was finally launched two weeks ago under the name My Accounts but none of the major high street banks agreed to be included, and three which were have this week demanded to be removed. One of the banks that wants its name off the site is Abbey National which has more than a million online customers many with its Cahoot account. Its e-commerce director Ambrose McGinn was blunt about the risk these customers could run.

MCGINN: We're very concerned that our customers should be giving away their pins and passwords to their accounts this is expressly against the terms and conditions of the account which we make very clear - indeed we tell our customers not to even disclose to our staff their pins and passwords and we have to say to customers if they do use these aggregations services then they do put themselves in a very difficult position if there is a problem on customers account then there isn't a lot that we can do because they will have invalidated their terms and conditions.

LEWIS: It fears like these that have led to almost all the major banks pulling out of the scheme and two of the internet banks that remain are warning their customers not to use the service. Research by Money Box has found that many of the other companies, still on the site, agree that customers will be breaching terms and conditions by giving their password to Citibank. Jonathon Mindell is Citibank's Sales and Marketing Director, I asked him first if he'd remove Abbey National, Cahoot and Halifax from his site.

MINDELL: Yes we will take them off and that will be happening over the next couple of days.

LEWIS: And what about those customers who have already registered with accounts with them on your site?

MINDELL: Well where that is the case we will be informing them that we're taking the sites off the accounts

LEWIS: You've also got the Royal Bank of Scotland on the site and we're told that they don't want to be on there and that they would like to be taken off as well.

MINDELL: Yes we heard actually yesterday, it was the first time I'd heard from the Royal Bank of Scotland and obviously as we've asked them for consent, they're not giving us consent right now, so will take them off the site as well.

LEWIS: So who's left as far as UK high street banks are concerned ?

MINDELL: In terms of high street banks not very many. This is an on line service so you'll see on line banks such as Egg and Smile the type of contemporary organisations that frankly are comfortable to be on the service and in fact will probably be introducing their own aggregation services before long.

LEWIS: Well they may well be - but when Money Box did a ring round on all the banks on your site you're quite right Egg and Smile are not going to ask to come off but they told us that the are going to be warning their customers not to use the site.

MINDELL: Well if that's the case that's news to us.

LEWIS: It just totally undermines this idea of having banks on there because all you're left with is Citibank - isn't it ?

MINDELL: Well My Accounts is about financial and lifestyle on line activity and if we take an example from the US where we've had fifteen months experience already, initially most customers put their non financial accounts on and over time as they got comfortable with it introduced their financial accounts as well. We're very confident that over time as all of these banks as part of the Apacs working committee that we are members of

LEWIS: This is the Association of Payment Clearing Services

MINDELL: That's right and there is a specific aggregation working party that is working towards some user guidelines and indeed the very fact that we're out there in the market is hastening everybody to come up with a solution.

LEWIS: Well one solution they've obviously adopted is to come off your site and the kind of fears they've expressed to us is that it is a breach of their regulations to give a third party i.e. Citibank peoples' passwords to access their sites - so they're concerned about the security issue.

MINDELL: The very fact that we've been running troubled free for hundreds of thousands of customers in the US on the same technology with no breaches to me says we have a very safe service.

LEWIS: If something does go wrong and somebody does lose some money the bank where the money was supposed to be is not going to compensate them because they say it's a breach of their terms and conditions. Is Citibank going to reimburse them ?

MINDELL: I'd be very surprised if any organisation whatever their terms and conditions would leave one of their customers high and dry. We wouldn't and I'm sure other organisations wouldn't either.

LEWIS: But they've all told us that is what customers risk. If it's so risk free and you're so confident why don't you simply say of course if anyone loses money we'll reimburse them.

MINDELL In a situation which hasn't yet happened, in all the time that we've been working, if that arises we will of course look at every individual case

LEWIS: But you won't guarantee that you will reimburse people if they lose money because of using you're site.

MINDELL: The situation hasn't turned up

LEWIS: No but it doesn't sound as if you're that confident that it's risk free- what your saying is oh it's completely secure but if it turns out not to be the customer bears the cost.

MINDELL: Of course it's completely secure and as I say if there is an issue I cannot imagine any organisation would want to leave a customer high and dry.

LEWIS: Including Citibank ?

MINDELL: Including Citibank

LEWIS: Jonathon Mindell of CitiBank. Well in view of these concerns will the Financial Services Authority regulate this major new service. Three months ago the FSA told money box it could regulate account aggregation but had decided not to do so. Were it's current plans any different ? - Philip Robinson is a Director of the FSA and he made it clear that the regulator hadn't changed its mind.

ROBINSON: The way we're dealing with this problem is by saying to consumers this is an issue for you to manage yourselves. The Financial Services and Markets Act says that consumers needs to take appropriate responsibility and we think we can help them do that by informing them of the risks. The key message is that this is an area that does not receive the same level of protection in law that other financial services do and if through some fault of an aggregation process somebody loses money the compensation schemes will not be enforced.

LEWIS: Philip Robinson of the FSA.

Well from account aggregation to branch aggregation. Two of Britains biggest building societies got together this week to allow customers to use each others branches. From this week the four million customers of Britannia Building Society and Yorkshire Building Society can pay in and take out money at any of the three hundred and thirty two branches the two societies own. Almost doubling the network available. With me is David Anderson , Chief Executive of Yorkshire Building Society. David is this just a way to cut costs ?

ANDERSON: No it's not about cutting costs at all Paul it's about improving service and a lot of our customers still like to use pass books we recognise our network and Britannia's network don't cover the country. The branches of the two organisations overlap very little this is just a genuine step forward in service.

LEWIS: And where they do overlap, I understand there is about thirty towns which had a branch of each of you, wouldn't it be sensible to get rid of one of those save the money- distribute it to your members ?

ANDERSON: No not at all. The work will still exist whether the branches are in one or in two, it's not necessarily possible to cut costs by closing the branches, that's not part of the agenda.

LEWIS: That's a very different message from what the banks give us. Is this a mutual way of solving these problems ?

ANDERSON: It's a very different message from the banks and if you look at branch closures over the last five years you will find that building societies have had far fewer than banks altogether. No it's about what can we do to help our members and if we can co-operate with others to help our members then we shall do so, it doesn't mean to say that we won't also compete.

LEWIS: But branches are a bit old fashioned aren't they - a bit of a financial burden, shouldn't you be moving your business towards the internet and phone banking ?

ANDERSON: We certainly need to deal with all our customers how they want to deal with us. You're quite right we are into the internet, we're into telephone banking. But over eighty percent of people according to our research still like some face to face contact even if they have those other channels available. So I think it's a question of being there for the customer in the way that they would like us to deal with them.

LEWIS: And of course when your customers go into Britannia branches they'll see that Britannia offers a higher rate on some savings accounts and some cheaper mortgages won't they - so they might well leave you and move to Britannia

ANDERSON: I think they may also see the same in reverse when they come into our branches but yes clearly some people may find the other persons branch more convenient. Both societies are very confident about what they offer to their members and are therefore confident that their customers will stay with them. After all they chose to come to us in the first place and this is just us demonstrating that we're trying to look after them.

LEWIS: There are security issues though aren't there - you say that they've come to you that they're your customers but now suddenly Britannia staff will have access to their records

ANDERSON: They won't actually, the system works very much along the lines of an ATM and our staff won't have any access to the personal data of Britannia customers it will just ask the system can I give this money to this person and therefore there is no data protection issues. We won't have an account list as such.

LEWIS: You and Britannia are the second and third biggest building societies - this will work better won't it if more join ? Are you in discussions with the fourth, fifth, sixth, seventh, eighth biggest societies ?

ANDERSON: We're running a seminar at the end of October to which another twelve building societies are attending. It's the second seminar we've run and we really would like others to come on board we'd like to create a genuinely national network of branches that may able us to offer other things through the Mutual Plus network that improves revenue for all the members.

LEWIS: And maybe avoid demutualisation ?

ANDERSON: I don't think that's on anybody's agenda seriously given the form of those who have demutualised already.

LEWIS: David Anderson from Yorkshire Building Society thanks. Well listening to all this in Nottingham is David Llewelyn Professor of Banking at Loughborough University . David is this tie up a good move for customers ?

LLEWELYN: Oh I think without doubt it is . First of all it is going to give easier, greater and more convenient access to the branch network, secondly it is a very good way of increasing customer access without at the same time increasing cost bearing in mind that all financial firms are under great pressure to contain costs. And thirdly, which I think was emphasised by David Anderson, it is a way of increasing competition in the type of products that are offered by different institutions without at the same time incurring costs of extending the branch network. So I think overall it is a factor which is beneficial to consumer and would in fact in the long run increase competition.

LEWIS: And at the moment they're talking of sharing their sort of physical asset - the shop fronts - later on will they begin to share the back office the computers that store the money and move it around ?

LLEWELYN: Well I think this is a good example of what's generally is happening in the retail financial services industry. More and more financial firms in order to get economies of scale, in order to cut costs, are collectivising some their back office operations through outsourcing, through joint ventures, to get costs down through collective operations. And I think this is the beginning of a much bigger trend and we'll see more and more back office operations and also branch network operations being done on a collective basis in order to reduce costs.

LEWIS: And finally Professor Llewelyn we talked earlier today about account aggregation using one internet site to look at all our online accounts- that seems to have run into the sand at the moment.

LLEWELYN: Yes it does - I'm not really surprised because it is quite a novel move in this country, although having said that it's still quite common and it's to be developed quite substantially in the United States and in Australia. But there are serious concerns about security, access to information, who uses information for what purposes. There are no agreed industry standards at the moment and it's quite difficult for consumers to set up but I have no doubt in the long run this will be a development that will carry forward. It is quite convenient potentially for consumers to have access to an overall picture of their financial position in one single portal.

LEWIS: David Llewelyn from Loughborough University - thanks very much for talking to us.

Now Equitable Life members have until Friday to get their comments in on the proposed compromise deal that we reported on Money Box a couple of weeks ago. Under the deal all members would give up some of their rights in exchange for the promise to increase the value of their policies. The deal is intended to get rid of open ended commitments and put Equitable on a sound financial footing. As part of the consultation process Equitable has been staging meetings around the country today it's Cardiff's turn to hear the Equitable bosses put their case and our reporter Chris A'Court is with them. Chris

A'C0URT: Good Morning Paul. I've joined Equitable Life on the latest stage of what's been dubbed its 'survival tour'. It's the half way stage in a two week series of public meetings in which Equitable's executives listen to policy holders and try to convince those on all sides that they should vote 'yes' to the compromise agreement. Today's venue is the Cardiff Hilton Hotel where there's been much talk of savings and pensions over the years. This impressive building in the city centre used to be the Welsh headquarters of Prudential Assurance. Cardiff Castle is just across the road and could be a good place for Equitable's bosses to retreat to if the going gets particularly tough today.

LEWIS: Well indeed because there are reports that at some of the other meetings policy holders have been expressing very strong views..

A'COURT: They have. And there's been some concern from those who want a compromise that these meetings could be another Equitable miscalculation. If those planning to vote 'no' carry the rest of the audience with them. But when I spoke this morning to Equitable's Chairman, Vanni Treves, he told me he thinks the whole consultation process is going well

TREVES: Quite apart from the views of many hundreds of people at the meetings themselves we've had over fifteen thousand written comments already. Certainly we're listening very hard and we'll do what we can to accommodate the concerns of as many members as is possible.

A'COURT: But will anything change? Are you holding something back? Will you better the offer before that final document is produced?

TREVES: We're holding no money back, there's only one pot, everybody knows the size of that pot what we will do is accommodate the concerns of members as best we can, given there's only one pot.

A'COURT: So really nothing much can change as a result of these meetings?

TREVES: Not a great deal financially but we can change quite a lot in the way in which we construct the scheme and put it to our members for a vote. We're at a crossroads, it's very unstable and there's only one way forward, and that way is a way to a compromise.

A'COURT: But not everyone is saying the agreement is a good thing and they're going to vote for it are they? Earlier this week you reportedly told one GAR policy holder that you understood it wasn't in his own interest to vote yes.

TREVES: We had a million policy holders. This compromise cannot be in the interests of every one of them. We're absolutely certain it's in the overwhelming interests of the overwhelming majority.

A'COURT: Looking ahead to the vote itself, and if there is a 'yes' to the deal, what happens the next day? Will you immediately put up a huge barrier to stop people who want to take their money and run?

TREVES: Absolutely not. There's never been a barrier, all we've tried to do is ensure that people leaving, as is their right, leave with their fair share of the assets of the Society and no more. The day after the compromise happens we receive two hundred and fifty million from the Halifax, we have a new stability, we have a new investment freedom, we have the prospects of a much better bonus policy.

A'COURT: We're not going to see, say, an exit penalty, an MVA, of twenty, twenty five per cent the day after the vote goes through?

TREVES: Not as a function of the vote going through. All our MVA's are a function of the market conditions and nothing else, if the market gets better the MVA will go down.

A'COURT: That's Equitable's Vanni Treves, Chairman of Equitable. Just to recap there - what he was saying. No increase in penalties the day after the vote unless Equitable can say the market justifies it, the option is still there it seems.

LEWIS: Yes, indeed, and what's the mood of policyholders hearing all that Chris? Because the meeting is still going on I know..

A'COURT: It is still going on, I've just come from the meeting. I have to say it's quite calm, quite measured, there isn't a lot of talk of voting 'no' actually. Most of the concern seems to be the difficulties of getting policy values from Equitable. It's very difficult everyone says and Charles Thompson admitted that there were problems with the computer set-up at Equitable's headquarters but he says that's being sorted out now.

LEWIS: And what's the timetable, have we had any more details of how this thing will progress from now on?

A'COURT: Yes, what's going to happen now is that after the consultation ends, at the end of this week, there'll be a letter to policyholders, then at the end of October everyone who has an Equitable policy should get that policy value statement that they've been waiting for. In mid November they'll get the document which outlines the final procedure for the vote, voting will probably close just before Christmas and the result should be known just inside the new year.

LEWIS: Chris, thanks very much. That's Chris A'Court in Cardiff and Equitable's policyholders meetings continue, details on the website and with the helpline.

Now on Monday every employer in the UK with at least five members of staff must have made arrangements to give them access to a pension scheme. The change is part of the move aimed at encouraging stakeholder pensions and any business that doesn't comply with the law could be fined up to fifty thousand pounds. It's well known that too few of us pay into a pension, roughly one in two adults has no pension plan apart from what they might get from the state. But is forcing employers to offer a scheme the right way? Last March we spoke to Rob Higginson at environmental consultancy 'Soils Limited' who was beginning to investigate a pension scheme for his employees. Seven months on he has chosen a stakeholder plan but doesn't think it's something his staff want

HIGGINSON: As a small company we're not in a position to contribute to their stakeholder pensions. I think most of my staff are of the opinion that for them to have a worthwhile pension they've got to make the sort of contribution that they cannot in fact afford, so they're not going to bother with stakeholder pension I don't think. We set up a pension scheme that I don't think is going to be used by my staff, so it was to an extent a pointless exercise.

LEWIS: Well one reason why Rob's staff are not rushing to join the scheme could be that the company pays in no money towards it. Three out of four small employers like Rob say they can't afford to do so. But new research indicates that if an employer does pay into the scheme employees are much more interested in joining. The research was done by Abbey National, Steve Conley is its Group Development Manager

CONLEY: The research shows that where employers contribute employees are three times more likely to join the scheme. The Government needs to recognise this and find ways in which to encourage employers to contribute to stakeholder pensions.

LEWIS: Although employers have until Monday to offer a scheme to their staff stakeholder pensions actually went on sale in April. In the first three months only three hundred thousand signed up. Ian McCartney is the Pensions Minister. I asked him if he was disappointed by the low take up ?

McCARTNEY: I'm not disappointed at all, far from it. In broad terms we have a very positive start

LEWIS: But three hundred thousand people is very few really isn't it out of the millions who don't have any pension?

McCARTNEY: Of course we're in the long haul here. Remember we're trying to change culture in the United Kingdom to get people to participate through their life time and to get people to invest in pension products.

LEWIS: What were your targets for take up of stakeholder pensions by the end of July?

McCARTNEY: You don't set targets do you?

LEWIS: Well the Government sets almost nothing else does it? You're telling me that on this key policy issue you didn't have a target?

McCARTNEY: The issue here is to make sure from the outset that people on average earnings have the opportunity to avail themselves of a product to help them invest in a pension, which a large proportion don't do now. So we've introduced a new product, we've given a commitment employers are required to introduce the product and be involved in the product and we're going to ensure to continue beyond October, where employers have not yet signed up stakeholders, will be encouraged to do so. So I mean it is a very, very good positive start.

LEWIS: Why don't you make contributing to a stakeholder pension or a personal pension compulsory?

McCARTNEY: We've no plans at the moment to make it compulsory for employers to contribute. I give a personal view here in a sense in that I want to encourage as many employers as possible to contribute to a pension scheme, whether it's a stakeholder or other forms of pensions. It is true to say that when employers contribute we get a larger uptake, that is absolutely true. We've not ruled it out but I've got no secret plan, if that's what you're asking, I've got nothing under the table here to say that at some point I'm going to introduce compulsion, that is not something we'd rule out.

LEWIS: But I was asking you about employees, about individuals, why don't you make it compulsory for them to have to contribute to a pension? Because if a large number of people don't, and the evidence is that a third of working age adults have no pension provision at all, that's going to lead to poverty and problems for the Government in the future

McCARTNEY: But the Government has made it clear for some time back now that we've no intention at this stage to introduce compulsion.We see no evidence of a need to do so at this stage. We've put in place a whole range of new policies, let's see how these policies operate.

LEWIS: Ian McCartney, Pensions Minister.

Now over the last year Money Box has been complaining about the low rates of interest paid on some savings accounts. Woolwich has already closed its Prime Gold account and now another one is going. Chris A'Court has the details, Chris..

A'COURT: Yes, Alliance and Leicester is the villain this time Paul. They were paying just 0.5% interest on their Bonus 90 account, while similar newer accounts paid more and didn't require as many days notice. But following what we understand is action from the Banking Code Standards Board Alliance and Leicester has now written to five thousand customers with money in the account offering most of them a better rate of interest and some compensation.

LEWIS: So good news..

A'COURT: Well partly, their savings have all been transferred to a better account but they still have to give thirty days notice and the move happened on 31st August, it's backdated for a year, with a minimum payment of �10. The interest on this account is not great, a maximum of 3.25% , if you don't have much in, it's still just 0.5%.

LEWIS: And some moves on endowments this week

A'COURT: Yes Allied Dunbar is the latest to pull out of selling endowment mortgages. Allied did sell more endowments than any other company but now it says falling consumer demand has led to it stopping providing what have become these controversial products.

LEWIS: Chris, thanks very much. Chris A'Court in Cardiff and if you have any questions about endowments or endowment mortgages you can ring us on Monday to talk to our experts on the phone in Money Box Live, that's 3pm here on Radio 4. Our e-mail address is Moneybox@bbc.co.uk but for today that is all we have time for. You can get more information about any of the items on today's programme by calling the BBC's actionline, 0800 044 044, calls are free 0800 044 044 or you can look at our website www.bbc.co.uk/moneybox. I'm back with Money Box at the same time next week, today the reporter was Chris A'Court, the producer Jennifer Clarke, and I'm Paul Lewis.