The Nationwide (Un)Fairer Share Scheme

The 'Nationwide Fairer Share' Scheme

In the United Kingdom (UK), the 'mutual' building society 'Nationwide' has very recently announced its new 'The Nationwide Fairer Share' scheme. With published annual pre-tax profits of ￡2.2 billion, Nationwide is now running the scheme to pay out ￡340 million of its profits back to its members.

Nationwide members that are deemed to be 'eligible' will receive a one-off payment of ￡100 paid directly into their bank accounts in June 2023. On the face of it, this seems to be a scheme run to benefits its members. However, upon closer inspection, the way it is operating the scheme seems to be distinctly more 'unfair'.

Let me show you why.

To begin with, according to Nationwide's Annual Results published for the 12 months ending 4 April 2021, Nationwide registered a total of 16.3 million members. If Nationwide were to fairly apportion this ￡340 million in profits to all of its members, it would instead be paying only approximately ￡20.85 to each member.

This would not exactly be considered to be a real bonus by its members, and it would very likely be considered to be much less newsworthy. Therefore, I would argue that Nationwide seems to have cleverly strategically crafted and marketed this scheme to pay out only to certain of its members.

This strategy allows it to leverage public marketing of its scheme to its benefit, but this strategy ends up actually being detrimental to the majority of its members.

In theory, to pay out ￡340 million in payments of ￡100, Nationwide is required to pay only 3.4 million members. Any more payments would exceed the ￡340 million in profits allocated to such payments. This means that 12.9 million members, or 79.14% of its members will NOT actually receive a payment, i.e., the majority of its members.

The question is, how can Nationwide minimise the final payment group to such a massive extent?

Well, once we take a look at its so-called 'eligibility' requirements, we can see that these requirements have been manipulated to eliminate the majority of its members. As a result, the majority of its members are excluded from receiving this payment, and the so-called 'Fairer Share' scheme seems anything but fair. These are the general Eligibility Requirements.

1. An eligible current account has to have been opened before 31 March 2023.
2. If you switched your current account to an eligible Nationwide account after 1 April 2023, you are not eligible for the payment.
3. Between 1 January 2023 and 31 March 2023, you had to have paid a minimum of ￡500 for at least 2 of the months (this excludes any transfers from other Nationwide accounts).
4. Between 1 January 2023 and 31 March 2023, you had to have made a minimum of 2 payments out for at least 2 of the months.
5. You have to have had at least ￡100 in either Nationwide savings accounts or Nationwide cash ISAs at the end of any day in March 2023 (this excludes any business savings).
6. If you did not have at least ￡100 in Nationwide savings accounts or cash ISAs at the end of any day in March 2023, you were required to have a Nationwide residential mortgage with at least ￡100 left to pay off on 31 March 2023.
7. You are also required to keep your eligible current account open until at least 30 June 2023.

Some of these requirements may potentially discriminate against certain types of Nationwide members, for example, students. This is because many students may not have opened cash ISA accounts or have taken out residential mortgages with Nationwide.

The dual requirement relating to having both eligible current accounts and savings accounts, is therefore problematic for many types of Nationwide members. For example, many long-term Nationwide members may have been Nationwide customers for years, or even decades.

Yet, because of the ongoing Cost of Living crisis they may have had to take out their money from their Nationwide savings accounts last year or this year, and used that money on a daily basis. As a result, they have been excluded from payment eligibility despite the fact that they have been loyal Nationwide members for years.

However, the real tell, is if Nationwide was so focused on giving back to all of its members, why did Nationwide not announce this Fairer Share scheme in advance? Why did Nationwide not publicly announce this scheme to the public and to all of its members before (e.g., in December 2022), to give Nationwide members the fair opportunity to meet all of the strict eligibility requirements?

The reason is simple. Because if it had, there is no way Nationwide would have been able to pay out ￡100 to its members. With 16.3 million members, that would theoretically have been ￡1,630,000 billion that Nationwide would have had to pay out. Even if only half (50%) of its members managed to meet the strict eligibility criteria, Nationwide would still have had to pay out ￡815 billion.

There is no way Nationwide could risk such an outcome, nor could it afford such an outcome. It therefore becomes clear that Nationwide has manipulated the Eligibility Requirements to suit its purposes. The conclusion is that in reality Nationwide 'membership' is not really equal for all of its members.

The 'Nationwide Fairer Share Online Bond' Scheme

In addition, at the same time it has used its secondary promotion, the 'Nationwide Fairer Share Online Bond' (NFSO Bond) scheme with a view to potentially recouping this loss of profits. The NFSO Bond scheme offers eligible Nationwide customers an interest rate of 4.75% AER/gross a year (fixed) for 2 years paid on any deposited savings.

However, a number of other 2 year fixed rate accounts and bonds offer similar, or higher, interest rates (e.g., Al Rayan Bank, 4.85%, Investec, 4.95%, Close Brothers Savings, 4.96%). So, what Nationwide is really doing is using this Fairer Share scheme national marketing campaign to actively promote Nationwide customer member investments in its 2 year fixed rate accounts.

The more of these new 2 year fixed rate accounts it can market and sell, the more money it will have tied in for the next 2 years, which it can then use. Under the terms and conditions of the new accounts, customers are prohibited from withdrawing any money during the term of the account.

Most people deposit at least ￡1,000 in such a 2 year fixed rate account, otherwise it makes little sense in terms of financial gain. For instance, even with ￡1,000, this amounts to only ￡47.50 in interest gained for one year. Many more people therefore deposit ￡2,000 or more to benefit over such a two year timespan.

As a result, Nationwide needs to only market and sell 340,000 (￡1,000 deposited) of its new NFSO Bond scheme to its members to recoup ￡340 million. That would amount to only 2.08% of its total 16.3 million members. Alternatively, Nationwide would need to only market and sell 170,000 NFSO Bond schemes to its members where they deposit ￡2,000 each. That would amount to only 1.04% of its total 16.3 million members.

Call me cynical, but I do not think Nationwide is treating all of its members fairly, nor do I believe that the new Nationwide Fairer Share scheme is actually fair vis-a-vis all of its members inter se.

RZ