All savers are equal at Northern Rock

The Northern Rock building society last week risked the wrath of its bigger savers, while delighting windfall-hunting "carpetbaggers" and most of its traditional North-eastern savings base, when it announced that its planned windfall would be the same pounds 1,400 of free shares for everybody.

The value of the shares, due to be handed out in October, is only estimated and their worth will depend on what view the City takes of Northern Rock's prospects when it joins the stock market in the autumn.

But the projected windfall is higher than most of its 900,000 savers and borrowers will have expected and is higher than the average bonus indicated by any of the four other societies due to hand out windfalls this year.

The society was expected to follow the model of the Halifax, Woolwich and Bristol & West windfall proposals by rewarding bigger and longer-term savers with higher bonuses. Only the Alliance & Leicester had taken the flat-rate route.

Christopher Sharp, Northern Rock's managing director, said: "That no single distribution scheme would satisfy all interested parties is indisputable. However, roughly eight out of 10 qualifying members will be better off under our proposals than would be the case under a variable benefit scheme."

The society describes its typical saver as someone with pounds 1,000 or so in an account who lives in the North-east, where the society has its headquarters and its branch network is concentrated. It is predicted that the windfalls will spark a mini consumer boom in the North-east, where one in three households is expected to receive a bonus.

But some savers with bigger balances will be annoyed that they will get no more than those with just pounds 100 in their accounts, particularly if those low-balance savers joined the society purely in search of a windfall - the so-called carpetbaggers.

Many of those bigger savers will have avoided making withdrawals for fear of reducing their bonus entitlement. At the same time the society has been criticised for taking advantage of these captive savers by paying poor interest rates. The society said that fewer than 100 savers had complained about not being offered higher bonuses.

Savers now only need keep as little as pounds 1 with the society to maintain their entitlement to the free shares, the Northern Rock says. However, savers might be advised to keep pounds 100 or more on deposit until they get their shares, in case of hiccups. If, for example, a predator was to bid for the society before it reached the stock market in October, there might be different rules for any new windfall plan.

The society's own windfall and the linked plan to convert the Northern Rock into a bank will be put to the vote on 15 April. Voting forms started going out last week.

Borrowers will also get the shares. If they are due to pay off their mortgage before October then the Northern Rock, like the other converting societies, will allow a minimal loan to be kept going so that the borrower does not lose out. Anyone affected should contact the society. Borrowers who are also savers get two lots of shares.

Disabled people whose accounts are held in trust for them and children who are under 18 on 15 April 1997 do not get the shares, even if they are in qualifying accounts.

The youngsters will get a cash bonus of around 8.8 per cent of their account balance as at 31 December 1996, while, in an unusual move, the society is proposing to give a pounds 1m donation to charity to stave off criticism that it is discriminating against the disabled.

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THE YEAR OF THE WINDFALL

Building society Average windfall When you'll get it

Northern Rock pounds 1,400 shares October

Alliance & Leicester pounds 1,000 shares 21 April

Woolwich pounds 1,200 shares 7 July

Halifax pounds 1,300 shares June

Bristol &West pounds 600 cash/shares Late August