EXTENDING POWERS OF FRIENDLY SOCIETIES

Measures to give incorporated friendly societies greater flexibility in extending the range of permitted services available to their members were announced by the Economic Secretary Patricia Hewitt today.

These proposed measures will allow friendly societies :

own subsidiaries which may themselves, in turn, have a subsidiary or more than one level of subsidiary;
to own subsidiaries formed in non-EC countries.

Commenting on the proposals, Ms Hewitt said :

"Friendly societies carry out invaluable work by encouraging saving, especially by those of modest means. The movement has asked for the restrictions on subsidiaries to be lifted. The Government has listened and acted. These changes will enable societies to more easily set up or acquire subsidiaries, providing a wider range of services for their members."

The proposals are outlined in a consultation document, "Proposed Amendments To The Friendly Societies Act 1992". The proposed changes can be made through a Deregulation Order under the Deregulation and Contracting Out Act 1994. The consultation period ends on 30 July 1999.

NOTES TO EDITORS

1. Friendly Societies' main business is in the provision of life, endowment and sickness insurance, including small scale savings products. On 31 March 1999 there were approximately 270 societies, with total funds of about £12 billion and estimated membership of over 5 million.

2. The most recent legislation governing them is the Friendly Societies Act 1992. Regulation is carried out by the Friendly Societies Commission.

3. Societies incorporated under the 1992 Act can set up or acquire subsidiaries which can provide a wide range of financial services including banking, ISA products, investment and unit trusts, household and motor insurance and residential homes. At 31 March 1999, 20 societies had set up or acquired subsidiaries.

4. Section 13 of the 1992 Act prevents societies from acquiring a subsidiary that may have subsidiaries of its own, and the subsidiary must be incorporated in an EU member State. This has caused operational burdens for those societies wishing to acquire a group of companies as it has meant the separate purchase of each member of the group.

5. Copies of the consultation document are available from Zubeda Esmail on 020 7270 4487. Responses to the document should be addressed to:

Graham Burbage
Home Financial Services Team
Room 42a/G
HM Treasury
Parliament Street
London SW1P 3AG

6. Media copies of the consultation document are available from Charles Keseru in the Treasury Press Office on 020 7270 5188.

Press Notices January to June 1999 index