Questions for the Presbyterian Mutual Society

Amongst some papers I discovered a brochure for the Presbyterian Mutual Society, it is undated but seems to be around 2002/2003. On looking at it I have some questions for the church and the former Board of Directors during the period from then until its collapse.
“What is the Presbyterian Mutual Society?”

According to the brochure:

I think the phrase “encourage Presbyterians to save through their own church“ and “for their mutual benefit” drives a horse and cart through the “legally distinct” duck and cover move we have heard (see Question 3 below).

What Assurance was given to investors?

A “categorical assurance” was given by the directors in this brochure that under no circumstances do they “speculate” with funds “entrusted to their care” but rather funds are used to advance loans to shareholders of the Society who wish to borrow.

Secondly if there is an excess of money (ie. if more money comes in than borrowers want to borrow) that excess will be invested “on the best terms available in established banks in Northern Ireland”.

So, according to this official brochure investor’s money is either out on loan to other PMS members or in cash accounts in Northern Ireland banks. The big question is one of security then? The excess money will only be invested in cash, an investment that (aside from bank collapse) does not go down.

How secure was the other money out on loans? The brochure answers these concerns:

What is acceptable as security?

The loans are secured by Property deeds, life assurance policies in excess of the amount owed and guarantors. Small loans under £5,000 were permitted unsecured which I’m sure were not a big part in the society’s collapsing asset value.

So, to any investor their money is well secured both the collateralised loans and the excess cash. Worst case scenario would be some guarantors not paying up in which case the society would have legal call on their assets or some houses used as security had significantly lost their value. Neither of these seem to be the problem with the mutual’s assets as far as we can tell. Instead somewhere along the line the makeup of the society changed to (as far as we can tell):

Questions

1. When did these rules of the society change? At some point they began to invest excess cash, not in bank accounts but directly in property and therefore expose investor’s money to greater risk than this brochure indicated. By anyone’s measure this is “speculating”.

2. Did the society inform all members of the change in their investment risks? I may have missed this discussion but so far I don’t see it on any of the news reports. Perhaps other terms and conditions contained clauses that allowed changes without informing investors? If the society had of continued with the level of security as described in this brochure their assets would not have been so radically diminished as they are rumoured to be now (40% / 50%??). In fact all the money is likely to have been completely secure. The Directors made the choice to wander from this investment approach, not the investors as far as I can see.

3. Why did a church spokesman claim in a Newsletter article the phrase describing the society was “inaccurate” when it was printed on official Presbyterian Mutual Society brochures? Does no one else have these brochures in their possession anymore?

The Newsletter article (original) states:

“Dr Watts states there is no connection between the Presbyterian Church and the Presbyterian Mutual Society,” said the reader.

“But the Church’s Board of Mission in Ireland website says, ‘The Presbyterian Mutual Society was established in 1982 to encourage Presbyterians to save through their own church and manage such savings for their mutual benefit to enable shareholders to borrow at a competitive rate of interest’.”

[this seems to be the exact wording of the brochure above, yet...]

A spokesman for the Presbyterian Church said the website statement was “inaccurate”.

He said: “No one has denied the links between PCI and PMS and the blurring of divisions that has led to this inaccurate statement that encourages Presbyterians to ’save through their own church’.

“The particular website it appears on was an interim site of the Board of Mission in Ireland and should have been taken down before it launched its official site at www.missionireland.org.

“However, it serves to illustrate that while the Church and the society are separate legal entities, that has at times been unclear.”

So at its outset the society gave indications in its literature of its clear (“categorical assurance”) of security, anyone looking at the information would feel that their money was safe. At some point things changed dramatically from that first advertised. Did future brochures (post 2002/2003) indicate this change in where investor’s money was going? And, more importantly were pensioners who had invested their retirement lump sums or redundancy money on the basis of the brochure I have informed by letter or some other method that their money had changed from a secured loan / cash investment to a part speculative property fund?

I hasten to add that I have not had any personal money in the Presbyterian Mutual; I am an interested member of the Presbyterian church whose day job has involved talking to many distraught elderly people whose incomes in particular have been destroyed by these events.