Pay booms for building societies' chiefs as millions of savers are hit with more than 1,000 interest rate cuts

Building societies made more than 1,000 interest rate cuts to savings accounts last year – even though the Bank of England base rate remained at an all-time low of 0.5 per cent.

But the resulting financial pain suffered by millions of savers – with many depending on the interest to boost retirement income – was not shared by those who occupy the boardrooms of organisations that are supposed to belong to members.

Just under half of chief executives, 13, enjoyed double-digit percentage increases to their pay packages.

Pay rise: Skipton's chief executive David Cutter (left) and Market Harborough BS boss Mark Robinson

Bar a few honourable exceptions who waived bonuses because of the tough economic climate, nearly all the bosses received increases far in excess of both general inflation and wage inflation.

For much of last year, both pay and inflation growth in the wider economy hovered well below 2 per cent.

 

Anna Bowes, a director of website Savings Champion, says the increases to building society executive pay are ‘unacceptable’ at a time when the interest that savers receive from their deposits are being cut, in some cases to record lows.

Last year there were 1,015 rate cuts to building society savings accounts, compared with only 75 in 2012. The sharp increase was a result of building societies being able to obtain cheap money from the Government’s Funding for Lending Scheme, which meant they didn’t need to attract money from savers.

Winner: Chris Pilling (left), chief executive of Yorkshire BS and David Stewart, chief executive of Coventry BS

Bowes says: ‘Given that being a member of your building society is all about sharing in the organisation’s successes, many savers will feel extremely disappointed to see executive pay soaring while the rate of interest they are earning is falling off a cliff.’

Alan Debenham of the Building Societies Members Association, a group representing customers, says too many chief executives are being paid ‘exorbitant salaries and bonuses’. He adds: ‘When it comes to boardroom pay, plc principles rule. It’s not right.’

The societies hitting savers the hardest seem to be the ones who are most generous when it comes to paying their chief executives. Jon Hall, chief executive of Saffron Building Society, saw his pay package – salary, bonuses, benefits and pensions – balloon by 33 per cent to £323,000. But last year the society, which has branches in Essex and Hertfordshire, made 84 cuts to savings rates.

Only Yorkshire Building Society applied more cuts, according to Savings Champion. Those customers with money in one of Saffron’s online e-saver accounts saw rates slashed by as much as 1.1 percentage points.

Someone, for example, with an e-saver issue 1 account, had their interest cut from 2.5 per cent to 2.2 per cent at the beginning of the year. In March it was cut to 1.7 per cent, then to 1.5 per cent at the end of September. Last month it fell to 1.25 per cent.

Last week The Mail on Sunday asked shoppers in Saffron Walden, Essex, home to the building society’s headquarters, what they thought about Hall’s £323,000 remuneration – more than double what Prime Minister David Cameron earns.

Although they are proud of the building society that bears the town’s name and appreciate the staff’s hard work, they do not believe the boss deserves such a big salary.

Retired publishing company administrator Patricia Sanz, 67, was visiting the society’s Saffron Walden branch to take out a new Isa and check on the health of her savings account. She said: ‘Staff on the counters are so helpful and friendly.

They are the ones who do the actual work, so surely they are the ones most deserving of any extra money, not an already overpaid boss. ‘What does Mr Hall do? He probably just sits in lots of meetings then drives home to a lovely big house paid for by the hard work of staff and customers’ money.’

Writer Karen McKibbin, 54, from nearby Thaxted, cannot understand why a building society boss should think they are worth so much more than anyone else. She says: ‘If he is awarded a 33 per pay rise he should be held accountable and explain exactly why he needs to be given every extra penny.’

Karen’s friend Amanda Cox, 50, from Burwell, Cambridgeshire, who is also a writer, says: ‘It is the “do-ers” that help make money for Saffron. They serve the customers and it seems wrong that Mr Hall should be rewarded for their hard work.

Serving up support: Patricia Sanz, left, and Karen McKibbin and Amanda Cox praised staff at the Saffron

‘We are all feeling the squeeze and it would be much better if any extra money could be fed back to staff and customers through better-value products and savings rates.’

Last year the average salary of a Saffron employee, including pension and social security costs, increased by just over 4 per cent – an average inflated by Hall’s 33 per cent rise. Hall says he appreciates the ‘sensitivity’ over his pay but says only two customers have complained – the society has more than 100,000 savers.

Customers can, however, vote against his remuneration ahead of the society’s annual general meeting a week on Tuesday. Hall says the society is in rude financial health and has ‘worked very hard’ to reward savers.

‘Twenty-two best-buy savings products last year is continuing the Saffron tradition of rewarding existing customers for their loyalty,’ he says.

Last year, Saffron made a pre-tax profit of £3.1million. Hall’s remuneration is dwarfed by some rival building society bosses, especially Yorkshire’s Chris Pilling (£870,000, up 16.4 per cent), Skipton’s David Cutter (£751,000, up 21.8 per cent) and Coventry’s David Stewart (£733,000, up 10.9 per cent). All three societies are much bigger than Saffron – Yorkshire, for example, is 29 times its size.

Yorkshire says that Pilling’s remuneration, boosted by £246,000 of bonuses, reflects its record mortgage lending last year – 17 per cent of total UK net lending across all banks and building societies – and its determination to protect rates for child and regular savers.

A spokesman says: ‘Our priority is to deliver financial security and value to our members. It is important we continue to be led by a competent and experienced team of professionals and it is therefore necessary to pay market rates to ensure we can attract and retain such individuals.

‘We evaluate the remuneration of all our people against competitors in the market and it is subject to review by independent consultants every three years.’

Yorkshire also says 90 per cent of customers who voted at its annual general meeting earlier this month supported the directors’ report on pay. But Debenham disputes the validity of these figures because Yorkshire – like nearly every other building society – encourages members to ‘quick vote’ either by email or post.

Anyone using a ‘quick vote’ automatically backs all resolutions put before the annual general meeting. Although the bosses of Penrith and Principality both enjoyed a bumper 2013, their increases reflect in part their promotion to the hot seat.

Jim Willens, chief executive of Newcastle, declined both an increase in his base salary (which would have taken it from £260,000 to £300,000) and a 2.5 per cent bonus.

Remuneration for Graham Beale, who runs Nationwide, the country’s biggest building society, will not be revealed for another month because its financial year runs to the start of April. In the last financial year he received a package worth £2,258,000.

Hilary McVitty, head of external affairs at the Building Societies Association, the industry’s lobby group, says: ‘Customers benefit from having strong, expert leadership in charge of their building society, particularly the chief executive.’