Classes of Societies
A permanent society is one which has not, by its rules, any fixed date or specified result at which it shall terminate. Permanent societies consist of shareholders, depositors, and borrowers. The amount that any society can take on deposit is restricted to 75 per cent of the amount of its mortgages. This is a safeguard to depositors in times of stress. Profits are distributed to both capital and investing shareholders after making reserves. Borrowers do, in some cases, get a rebate on the interest paid by them.
A terminating society is one which, by its rules, is to terminate at a fixed date, or when a specified result is reached. This is usually conducted by means of the group system, which requires that when the specified result or period is reached, the group winds up and refunds of subscriptions, together with the profits, are made to its members. Thus, in a terminating society, the profits are shared by the members, less of course the cost of management. The life of these groups usually runs from 20 to 25 years from commencement.
Terminating societies have the larger membership in New Zealand, as is shown by the following table:
Statistics for 1962–63 show that there were in New Zealand—
54 permanent societies with 34,237 shareholders and investing capital and shares £13,357,260 and
18 terminating societies with 280,733 shareholders with investing shares of £34,633,334.
Minors may become shareholders in a building society, but their parents or guardians must act for them until they attain the age of 18 years. They cannot, however, generally execute mortgages or purchase property until 21 years of age.
Many building societies recommend borrowers to insure their lives for the amount of the mortgage. This insurance decreases as the amount of the mortgage decreases yearly. The premium may be a single payment by the borrower or added to the mortgage and repaid over the term of the mortgage. The premium based on the age of the insured is very low – for example:
For £1,000, 16-year term, the premium payable fortnightly is:
Savings bank departments are operated by several societies. They are subject to Government restriction on the amount they may accept by way of ordinary deposit and the amount of savings bank deposits. Clients may make deposits and withdrawals on similar lines to the Post Office Savings Bank.
Each society functions as an individual establishment with its own particular features, but is affiliated to the New Zealand Building Societies Association, which body attends to building society problems at national level.
by John Laurence Arcus, Secretary, New Zealand Building Societies Association, Wellington.