Will customers celebrate the Irish wedding?

Steve Lodge explains how the windfalls will work for Bristol & West savers and borrowers

The seemingly never-ending building society windfall stampede continued last week. But the announcement of a pounds 250-plus handout from Bristol & West will, nevertheless, disappoint many speculative savers.

On Monday, as expected, Bristol & West said it would be recommending to its members that the society be taken over by Bank of Ireland. The basic windfall will be pounds 250, the average pounds 600, payable mid-1997 to a million of the society's savers and borrowers.

Speculation immediately moved on to the prospect of the Birmingham Midshires coming up with a windfall, possibly as a result of merging with the Woolwich and piggybacking on the latter's planned conversion into a bank.

The suggestion is that the Birmingham Midshires' electronic organiser- toting captain, Michael Jackson, might take over the helm of a "Woolwich- Midshires" would-be bank, following the recent ousting of Woolwich chief executive Peter Robinson for alleged financial irregularities. Tipsters note Birmingham Midshires has not been as strong a proponent of building societies' traditional mutual status as the likes of Nationwide and Bradford & Bingley, and has not come up with a specific benefits package designed to emphasise the claimed benefits of mutuality.

In response to the latest wave of carpetbagging - savers opening accounts in the hope of a windfall - the Birmingham Midshires upped the minimum amount to open a new account at some city centre branches from pounds 100 to pounds 1,500 (pounds 500 at the remaining branches). Other societies are also moving against carpetbaggers by raising their minimum opening balances or stopping new account openings altogether. In some cases they are even closing savers' accounts. Particularly discriminated against are those living outside the localities of regional societies.

Among the biggest remaining societies, Leeds & Holbeck last week also put up its minimum opening balance to pounds 1,000, while the Chelsea moved to pounds 2,500. The Derbyshire and Cheshire societies raised their minimums to pounds 1,000 and pounds 2,500, respectively, to non-locals only.

A whole raft of smaller societies - including Bath, Chesham, Chorley & District, Kent Reliance, and Newbury -will now only open accounts to locals, according to analysts Moneyfacts. And earlier this month the Surrey- based National Counties and Lambeth building societies put up their shutters to any new openings because of a wave of speculative small-balance savers.

But despite the apparent rout of the traditional building society movement, windfall hunters should not assume such anti-carpetbagger moves are necessarily preludes to a bonanza. While it is inevitable that more societies will produce free shares or cash, it may take some societies years to come up with the money. Nevertheless, the sooner windfall hunters open accounts, the more likely they are to sidestep higher stake requirements and similar defensive or cut-off moves.

Here are the details of the Bristol & West deal:

Who gets what?

A million Bristol & West customers, the vast majority of them savers, will get windfalls worth at least pounds 250 and as much as thousands of pounds.

Bank of Ireland shareholders get nothing directly, although the pounds 600m price tag for the society is regarded as reasonable value for the bank, and its board says the bank's profitability should increase as a result.

The average windfall for the society's qualifying savers and borrowers is pounds 600; savers who have been with the society since the end of 1994 will get an average of pounds 1,000.

Most savers and borrowers with the society will qualify for some level of windfall. The basic windfall is pounds 250. This goes to the society's 180,000 current mortgage borrowers; also to savers who joined the society after 31 December 1994, as well as savers who have been with the society since 31 December 1994 or before but who had account balances totalling less than pounds 100 on 15 April. Savers will need to make sure they top up their savings to pounds 100 by the end of this year to qualify.

Borrowers and the named recent savers get their windfall in the form of a special type of Bristol & West share called a preference share, which will pay a dividend, and whose price can rise and fall. It can be sold like any share on the stock market.

Pre-1995 savers who need to top up their accounts to reach the pounds 100 threshold will get their windfall in the form of at least pounds 250 in cash. Pre-1995 savers who had pounds 100 of savings with the society on 15 April will get a windfall of at least pounds 500 in cash in addition to a variable amount of cash related to the lower of their account balances on a number of dates yet to be announced. The cash windfall figures proposed are "at least" pounds 250 and pounds 500 (respectively) because the society says it may be able to improve them marginally when it has de-duplicated its list of members.

Borrowers and savers will get two handouts, but holders of more than one savings account will have their account balances totalled for calculating their windfall eligibility.

Unusually, the doors are not yet closed to carpetbagging borrowers. People who take out a mortgage this year, whether or not they are already a saver with the society, will qualify for pounds 250 of preference shares as with other borrowers, says the society.

If your Bristol & West Tessa should mature in the near future your eligibility will not be affected as long as you keep the money with the society. You can also switch directly between other savings accounts with the society without affecting your eligibility.

Who misses out?

In total, thousands of savers. The society's Capitalmaker Tessa does not qualify for a windfall, nor do accounts with its offshore arm in Guernsey, nor savings in Eagle Star PEPs, unit trusts, endowments or personal pension plans bought through the society. Children under the age of 18 at the date for voting on the proposals do not qualify for a proper windfall: instead they will get what is called the statutory cash bonus, a fairly small sum yet to be quantified and based on their account balance.Many of these will be in the society's Snoopy and Children's Accounts. Accounts in parents' names held on behalf of children will also attract only the statutory cash bonus.

Savers who are currently eligible for a variable bonus as well as a flat pounds 500 - those who had accounts on 31 December 1994 and have balances of pounds 100 now - may lose out by reducing their savings. The society has not yet announced the qualifying dates for the variable bonus. Meanwhile, savers should keep at least pounds 100 in their accounts.

Anyone who opens a savings account from now will not qualify for the windfall, although people who take out mortgages will.

Is it a good deal?

Windfall hunters (and borrowers) will be disappointed with the pounds 250 basic handout - it compares with a basic pounds 500 from other societies. More than a quarter of Bristol & West's qualifying customers will probably get just the pounds 250, including many thousands of recent carpetbaggers who had to put up pounds 2,500 to open an account. For them a windfall of 10 per cent or so of their stake may seem fairly measly.

Against that, however, relatively few groups of customers are disqualified and some savers could get thousands of pounds. The proposals have made no attempt to exclude carpetbaggers by setting an early cut-off date - the first qualifying date was 15 April, the date of the announcement. Savers with balances of less than pounds 100 will also be grateful of the opportunity to top up their accounts to qualify. They need to do this by the end of the year.

The preference shares that will go to borrowers and savers of less than two years are a bit of an oddity. But the society says that current regulations prevent it from paying cash to these people.

The suggestion by some analysts that Bank of Ireland has got a good deal in paying pounds 600m for the society also begs the question as to whether members might feel short-changed. A prime example would be borrowers who are being given a flat pounds 250 of shares, but no particular guarantee of good value on their mortgage rates in the future.

A higher bid from another financial institution cannot be ruled out, but the society has not been seen as the tastiest morsel among its peer group. This, in part, reflects lending problems in the early 1990s.

What happens next?

Last week the society's customers were sent confirmation of the takeover proposal and a leaflet, Answers to Your Questions. This is also available in branches. There is a free information line on 0800 886633. The detail of the proposals, including the qualifying dates for the variable distribution, will be out later this year.There will be a special general meeting early next year to vote on the proposals. The deal is also subject to a separate vote by Bank of Ireland shareholders.