A sense of relief

chancellor-of-the-exchequer-george-osborne1For a number of months now, savers with the distressed Presbyterian Mutual Society have known some of the details of a proposed rescue package. The package required HM Treasury to approve a £175 million loan to the Administrator plus a £25 million cash pledge. At one stage in the spring we thought that this proposal was on Gordon Brown’s desk awaiting his approval, but that approval never came. Yesterday the Chancellor of the Exchequer, George Osborne, announced that the package had been approved. What a relief!

Last February I went to the Treasury with two senior advisors whose knowledge and understanding of the financial world can only be described as encyclopaedic. We presented what we believed were compelling arguments in favour of a government rescue of the PMS. The weather conditions around Westminster that day were dismal, and our reception in HM Treasury was equally depressing. We were given no hope that Treasury would ever do anything to rescue the PMS savers. So yesterday’s announcement marks a very significant and important change in the Treasury’s position and an important leap forward in the campaign to see the PMS crisis resolved.

It seems that once the size of the cake has been determined, it will be up to the Northern Ireland Executive and the Administrator to decide how that cake will be sliced. They face a challenging task. On the one hand, there appears to be a genuine desire to see that smaller savers, who have been left most exposed by the crisis, are rescued. Under the current administration, and without a rescue package, these people are at the back of the queue in terms of any distribution of funds and are at risk of losing everything. On the other hand, the final decision about the approval of any rescue package will be taken by the larger savers, and in that important vote those with most money in the PMS carry the heaviest punch.  Can a scheme be devised which will help the smaller savers and yet be agreeable to those with larger savings?

Throughout this campaign we have insisted that a fair and just solution would be achieved if everyone got access to 100% of their savings. When Mr Cameron and Mr Paterson said they were committed to such an outcome, they did so in the context of quoting Mr Brown’s claim that “no British saver has lost a penny in the financial crisis”. We have campaigned with that objective clearly before us. But even when a £25 million contribution from the Northern Ireland Executive and the £1 million contribution from the church are added to the pot, the total of £226 million is still not enough to give everyone immediate access to all their savings. Can our goal be achieved?

In the absence of our preferred option, namely the take-over of the PMS by a larger financial institution, the question is: Can the Administrator, given the requirement to pay back the £175 million loan, manage the PMS assets over the next few years in such a way so that everyone eventually gets their money back? That will clearly depend on a number of factors outside his control, such as the overall improvement in the property market, a steady rental income from PMS-owned properties, and the repayment of loans to the PMS. Given a favourable wind, could we get close to our goal? In hoping for a favourable wind, some would say we are being much too optimistic. The current economic storm is very much against us.

Savers will have to weigh very carefully the alternative route. A move to sell-off the PMS assets immediately would result in nothing for the smaller savers and only a percentage return for larger savers, with no further money becoming available.

We await the details of a scheme for the use of the resources which were approved yesterday. And as we wait we continue to pray for the Administrator and members of the Northern Ireland Executive who have given so much time and energy in seeking a resolution of this crisis.

17 Replies to “A sense of relief”

  1. A fair and just solution for the UK taxpayer would NOT be a 100% return as that would be a huge subsidy. Current assets are @ £203m and liabilities £275m. Doing the maths suggests 74p in the pound, less the cost of interest on the loan. THAT would be fair and just. I, for one, would like to see the directors prosecuted for taking part in regulated investment activity whilst unregulated. Anyone else would be!

  2. Rev Carson,
    Thank you for all of your hard work and for keeping us up-to-date.

    With reference to NI Executive, they have not given a definitive indication of their share yet. Is there any possibility that this could be £50m, not 25m?

    Yesterday’s announcement of the government’s commitment has been very much welcomed and we pray that the NI Exec will indeed consider their contribution carefully.

  3. I’m sure we all want to express again our sincere appreciation to Stafford and so many others who have worked tirelessly to get a resolution to this.I know we are not there yet but our prayer is that it will not be another year before people receive some money – so many do not have time on their side! Lets keep the pressure on until the job is done! Thanks again

  4. Thanks for a sober assessment of the tremendous progress made, but one cannot but worry about the ability of our regional ministers to deliver.
    A pity the national government was not able to handle the whole affair.

    I am very grateful for your efforts and those in the lobby group and in politics, who made this happen.
    Perhaps now is the time for some letters of thanks to the PM and colleagues, John McFaul, Reg Empey, Mark Durkan and several MPs and Peers whose efforts in the background were essential.

  5. not forgetting the hurdle of the judiciary permitting an administrator to continue beyond the normal term of an administrator. When does an orderly wind become continued ‘running’ of business in order to maximise returns for shareholders?

  6. It is a relief to hear that a package has been approved at last. The money has not been returned to the savers yet but the longer the Administration lasts the less money will be available to return. I think of the two 80 year olds that I know and wonder will they ever see their savings. I also think of the widow I know whose late husband’s money has been tied up and his will cannot be carried out. This is not the end yet.

  7. Iwas sorry to see Steve introduce a negative note to what has been the first time of hope for the PMS for two years. With respect to him, he is incorrect. I have a close relative who has been a corporate lawyer for over twenty years and he tells me that neither the FSA nor the DTI have ever prosecuted directors who were unpaid volunteers – the accounts of the PMS show that its directors received no remuneration.

  8. I wonder how the distribution will work for those savers who have £40k or less invested? If as suggested those with £20k or less get their money back qickly and the “creditors” get their money, a saver with say £32k will receive £12k and have to wait indefinitely for the rest while someone with £19k saved will get all their money promptly.

    How will outstanding savings be repaid if income/returns go to service the Government loan?

  9. With respect Dr Carson, I was encouraged to put my money in the PMS because of the endorsement by the Presbyterian Church in Ireland. The adverts on the back page of every Herald, the enthusiastic praise of PMS at the General Assembly, the pulpit call and the promotional leaflets in the church vestibule stating that the Directors would under no circumstances speculate with my savings.
    I understand that 450 church building projects benefited from the cheap finance available to them from what I thought was a church based savings club or “credit union”.
    The paltry offer of £1M from the Church is quite frankly an insult, and your admission in yesterday’s press of an untouchable £40M general investment fund needs a lot more explanation than the excuses you have given to date.
    It is time for the PCI to step up to the plate, admit their mistakes, responsibility and liability, and start acting like a Christian organisation. Or you will miss the greatest witnessing opportunity you have ever been given.

  10. Sincere thanks to Dr. Stafford Carson, Isobel White and others for their time and effort expended on behalf of savers in PMS. It has been evident throughout this terrible dilemma the Christian character of these people who have been great ambassadors for the Church under unprecedented criticism due to the PMS crisis. Although the PMS saga is far from over, I feel that if the Church is to regain lost credibility it must promote the original ideals of Mutuality of the PMS, and by example, (as many churches’savings exceed £20,000) forfeit their ‘right’ for preference in any distribution, as indeed, I feel, any right-thinking PMS, saver should feel obliged to do.

  11. What ever happened to your stance on mutuality Dr. Carson? Previously you said “… any ultimate resolution of the PMS’s difficulties which reversed the founding principle of mutuality and discriminated against the smaller savers would not only be a grossly unfair but also a hugely divisive outcome for Presbyterian congregations….”(http://www.staffordcarson.com/2010/01/patience-prayer-and-the-pms/)

    Should this not also apply to all, bearing in mind that a large number of them will have to forfit the first £20k which is well in excess of half their savng in the PMS?

    This is highly unfair just as it was when the smaller savers where told they would receive nothing from the interim payment. I never expected that 100% of savings would be returned, but surely the only fair resolution is that all monies are distributed evenly?

    Are all Presbyterians no longer equal in your eyes?

  12. From Cameron above,
    “How will outstanding savings be repaid if income/returns go to service the Government loan?”
    I have been thinking exactly the same as you. I cannot work out where the difference to make up 100% is going to come from.

    From Independent.ie on Thursday 15th April 2010:
    “The Stormont Executive has agreed a £50 million bail-out of Presbyterian savers in Northern Ireland.”
    I am curious to understand why our Executive is now only putting 25m into the pot.

  13. Passmeby :
    From Cameron above,
    “How will outstanding savings be repaid if income/returns go to service the Government loan?”
    I have been thinking exactly the same as you. I cannot work out where the difference to make up 100% is going to come from.
    From Independent.ie on Thursday 15th April 2010:
    “The Stormont Executive has agreed a £50 million bail-out of Presbyterian savers in Northern Ireland.”
    I am curious to understand why our Executive is now only putting 25m into the pot.

    It would appear that the shortfall of £50M if not coming from the assets of PCI will have to be partially accessed by legal action against the assets of those of “experienced and respected ministers and laymen of the church” under whose stewardship this debacle took place.

  14. I have read the various comments regarding the repayment of 100% of savings to those with under £20,000. A question I would like clarified as I have under £20K but have part of this as savings and the balance as Loan Stock i.e. I am also a creditor. Where do I stand.I congratulate all the people who have worked so hard to get us to where we are now.Sadly there is quite a way to go. My father in law is 0ver 93 years of age and with many other elderly people despair of ever receiving the return of his money.Two of my grandchildren , one finished at university(No job)the other in 2nd Year could do with their funds. I know that their are alot of hard luck stories but time is of the essence.

  15. Without knowing all the information available to the Administrator, I suggest using £50,000 total holding or less as a figure to identify “small savers” in other words a figure that would have been the compensation limit if we had been properly registered with the FSA. Those in that category could receive repayment of “credit” holding from the Government loan, if appropriate, and the £20k as savers from the other pot of money. Everyone at £50k or below would then have been repaid. The larger holdings would be paid as creditors from the Government loan.

  16. No harm to George – in the history of the law, there has never been a successful claim against unpaid volunteer directors, few successful claims against any directors and no reported claims against directors arising from the financial crisis in 2008, even the highly paid, full-time directors of major financial institutions. (The clue is in the word ‘limited’ = limited liability.) There is always a first for everything but it is never easy to make new law.

  17. I much appreciate Dr Carson’s update in the Presbyterian Herald but I’m still left wondering about definitions. What does “small saver” mean – does this apply to all holdings in the £20k or less category ie the savings element no matter how large the holding may be? Would someone holding over £20k therefore be entitled to a percentage from the Mutual Assurance Fund and the creditors repayment fund. If this is not the case those with £50k or less could be substantial losers.

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