If you’re anything like me (and if you are, I’m sorry, and have you tried therapy?) then you’re well-acquainted with those online tables of the top savings accounts. But have you considered smaller building societies that might not make these lists?
We all know the drill in 2024. You need somewhere to park your cash. An account with an interest rate that sees your stash nibbled at rather than swallowed up by the Inflation Monster.
My personal go-to are the tables updated by the Money Saving Expert team. But there are lots of others. Search for ‘top savings rates’, and you’ll get up-to-date results.
The top scorers are usually online challenger banks. Mostly they’re absolutely fine. Just check any potential candidate has the full FSCS protection of £85,000 – especially if it sounds like something Del Boy threw together in a get-rich-quick scheme.
(“Rodders, what’ll we call our bank? Monzo? Nah – how about Pockit?”)
However I’m going to make the case that you should consider your local building society.
Rate expectations
National building societies (BS) are included in those Best Buy tables, alongside banks new and old.
For instance, top BS picks as I write include…
- Leeds BS (paying 4.67%)
- Yorkshire BS (paying 4.35%)
…which are respectable enough, though they can’t compete with the likes of Trading 212 and Moneybox, which both tout 5.17% right now. (T&Cs apply with all these accounts, and that Trading 212 link is monetised so The Investor may be able to buy an M&S Meal Deal this weekend if you sign-up!)
What the tables might not show you is the best rate offered by your local building society.
And you could be surprised at just how competitive these can be.
What are building societies?
I think of building societies as slightly more cuddly banks.
Rather than being run for the benefit of shareholders, as banks are, building societies are accountable to their members. And the members are their customers.
The first society was formed in 1775 in Birmingham, with recognition of the nascent industry coming with The Regulation of Benefit Building Societies Act in 1836. The next 200-odd years saw more legislation and regulation, with the sector hitting its high-water mark in 1986. That year The New Building Societies Act gave them the option to become banks. Over the next few years many did just that.
So don’t be fooled by a local-sounding name from yesteryear – like a fancy surname retained since the Norman conquest – because you may be looking at a bank in sheep’s clothing.
For example, when I was a kid in North East England we had accounts with the Halifax Building Society. But while I was a teenager and wasn’t paying attention, Halifax went to the dark side. It ‘demutualised’ and turned into a bank. Others followed suit.
However not all building societies did the (mis) deed and there are plenty left today.
Surviving building societies tend to have a local focus. They usually have a town or city in their name.
Again though, not always. Nationwide Building Society is, as its name suggests, a nationwide mega-building society. And the Teachers Building Society is specifically for teachers – and also, slightly confusingly, for anyone in Dorset, Wiltshire and Hampshire, with its local hat on.
Beware the bankers
I’m not saying all banks are sharks nor that all building societies are cuddly teddy bears. That’s not true.
In fact I tend to err on the side of believing that every big organisation is out to get me.
I’m just saying that these days my local Halifax branch won’t let you go to a counter unless you’ve first run the gauntlet of three different iPad-wielding staff members – each time announcing your financial business to every curious onlooker perched nearby on the soft-play sofas.
My mother’s been trying to make it to the counter of Halifax for two years.
Kafka would be taking notes.
What are the advantages of building societies?
Sometimes building societies have savings rates that equal the top online banks, and mortgage offerings that are just as good or better than other brokers. Other times they come close.
My point is they are definitely worth checking out. Yet they don’t often show up in comparison sites or tables. You have to do the leg-work yourself.
The good news is that you don’t always have to live nearby. These days most building societies have useful websites. Some – like Yorkshire BS and Leeds BS – enable you to open accounts online even if you don’t live in the area.
And yet… there’s also a case for getting up from your sofa (did I hear you actually gasp there?) and wandering along to your local high street to have a chat with the building society folks.
Assuming you a) have a local high street that isn’t derelict and b) have a building society with a building.
Field report
The last time I went out exploring – to open a cash ISA at my local building society – I was armed with info from its website, only to be told: “Oh, those were yesterday’s figures. This morning’s issue of the account has a higher interest rate”.
So I came out happier than I expected. A rare situation in dealing with banks, I’ve found.
They sometimes chat to you, too. You can go in, sit in the warm for a bit, and talk to someone about money. There’s a coffee machine in the corner. They’ll occasionally offer you a cup while you wait.
People really seem happier in my local building society. It’s like a weird banking utopia.
Do building societies have any disadvantages compared to banks?
Building societies don’t have as much to offer as banks. They’ll do savings accounts (including ISAs) and mortgages, but many don’t do more than that.
If you want a current account and lots of additional features, you’ll probably have to look elsewhere.
Building societies aren’t usually a one-stop-shop then. They’re more targeted at a particular strand of your financial management.
Also, their online offerings can be pretty limited. You might be able to check your account online, for instance, but not actually move your money around much without going into a branch. For some people that’s a huge disadvantage.
However I find that the relative simplicity of building societies works well for me in some situations.
For instance, last month I gave my 12-year-old son his first prepaid card. He was off on a school trip abroad – don’t even get me started on how much that cost – to a country that doesn’t use cash very much. The kids were advised to take a card for buying snacks and souvenirs.
Naturally getting my son equipped wasn’t a smooth process. I had to get a card for myself too, so that I had a parent account for the child account. (And ever since I did, it’s been spamming me with ads for ‘easy investing’ and ‘want to buy gold?’).
But eventually both cards were set up. My son now has a card loaded with donations from his grandparents to take on his trip.
Slower and steadier saving and spending
The worrying thing is that my son loves his card. He carries it everywhere he goes. I think he’d sleep with it if I let him.
Sometimes he stops by McDonalds on his way home from school to buy a drink just because, he says, “It’s fun to use the card”.
Okay, I can see why. You select something on the big shiny ordering machine, tap your card, and like magic somebody brings you a large Sprite Zero. That was science fiction when I was twelve.
But the money doesn’t seem real to him. The can of Sprite does, but the cash that paid for it is just a number that changes on a phone screen. For those of us who are old and grey (just a bit grey in my case, honest), it’s easy to make the connection. But for kids growing up in an increasingly virtual world, it’s different.
The building society approach counters that. It slows things down.
If his grandmother gives my son a £20 note, I’ll take him to the building society with his passbook. He hands in the £20, his book gets stamped, and he can see the physical money transferred to a number on the page. If he wants to do anything with that money, he has to go into the building society and ask.
There are levels of checks that slow down the immediacy of spending. As a parent I like that a lot.
Why I like to support my building society
There are other benefits to using your local building society
As already mentioned, in my neighbourhood the benefit is physical branches. My local BS – Newcastle Building Society, if you’re interested – hasn’t just hung on to a high street presence where banks have fled. It’s actually expanding its operations, opening new physical branches around the region.
Then there’s the community side.
Building societies can offer some interesting services. My local branch, for instance, provides a meeting room that you can book free of charge. I was so impressed by the offer that I immediately started trying to think of people I could assemble for an official meeting of some kind. (It didn’t work, of course – there’s nobody in my town who wants to meet with me except my cousins. And I’ve been crossing the street to avoid them for years.)
Now, I don’t know anything about high-level finance. I’m just a regular person in a regular town, doing regular shopping in a run-down high street that has more nail bars than banks.
But it seems to me that building societies are becoming increasingly attractive to people because they’re looking at what their customers want, rather than trying to tell their customers what they should want.
BSs: no BS
There’s no denying I’m a dinosaur about a lot of things.
I don’t have the new Vanguard app. (Why would I want to check my investments on the bus?)
I resent the ubiquity of QR codes. (If I have to scan a QR code for your information, then I don’t want your information).
My approach to change can be best described as ‘grumpy’.
So maybe I’m missing the advantages of our kids being born digital. Perhaps my views will change in a few years, when newer and more terrifying forms of progress make tappable cards look like Victorian slates. Maybe I’m alone in liking a passbook that can be stamped.
But in this age of online everything, in which you need two-factor authentication to change your socks, I find it strangely comforting to have an account that tucks my money away without any online tinkering.
I don’t think that I am alone. My building society has big posters advertising their use of passbooks, and apparently they attract a lot of new customers. My parents moved their savings from the bank to a building society when their bank phased out passbooks.
Lots of regular people resent it when the relentless march of progress whisks away a system that worked for them.
Anybody else still miss video tapes? Nobody?
Alright, I’m a dinosaur. But there are other dinosaurs out there too.
And in the dinosaur community, building societies are our happy place.
