Belfast Telegraph

Presbyterian Mutual rescue mission likely to fall short


John Simpson

By John Simpson

The Presbyterian Mutual Society (PMS) faced a crisis where its members could have lost a large part of their savings deposits in 2008 when the value of the society's assets fell sharply because of the fall in property prices. An untidy and uncomfortable wind-up looked likely as members tried to redeem their funds faster than assets could be realised.

A scheme of arrangement emerged where PMS received loans from the Northern Ireland Government (£225m) and from the Presbyterian Church (£1m). This scheme facilitated payment in 2011 of £232m to society members and creditors.

Pending the evolution of the funding position in a 10-year period, society members, partly by the compulsory deferment rules for the scheme and partly through voluntary deferment of repayments, postponed seeking repayments of nearly £48m of their savings or shareholdings.

Of the £225m lent by Government, £175m is gradually, with interest, being repaid as a first call on money available as assets are realised.

The other £50m, from Government, is at the end of the list of creditor priorities and is dependent on there being any surpluses after other creditors were paid.

The loan from the Presbyterian Church ranks equally with the last £25m of the government loans.

The accounts of the PMS have now been registered for the year ended March 31, 2018, nearly eight years into the agreed 10 year wind-up period.

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These accounts show an orderly evolution of the scheme of administration. In March 2018, of the £175m preferred creditor type loan from Government, repayable on demand, nearly £64m has been repaid along with annual interest at 2.02% of £18.5m.

If repayments continue for a further three years at about the amounts in 2017-18, there might be a shortfall in the funds available to repay the £175m of possibly £65m-£70m. The actual outcome cannot yet be finalised, but could differ substantially.

If there is a shortfall in funds to repay the preferred creditor loan, then all the other creditors would receive no payments.

In that eventuality, the potential liabilities would be:


Members' loan savings £27.8m

Members' share funds£19.1m

Presbyterian Church£1m

Remaining Government loan£50m


These potential liabilities, or funds which might not be repaid, total just under £98m. Just over half of the possible final deficiency would, on these figures, fall on Government, but a large amount will not be available for members of PMS.

The total cost of winding up PMS would be a loss of about £47m to members of PMS.

The accounts for PMS at March 31, 2018 are, of course, not capable of being used to forecast the likely outcome in 2021-22.

If the remaining assets are liquidated at market prices which fluctuate significantly the final accounts could look completely different. If property values rise, the ultimate deficit may be smaller.

However, with less than three years to go, a dramatic recovery is problematic.

As the years progress, the interest in the final outcome will increase.

The possibility that the Government loan to the PMS would not be fully repaid is an assumption by some observers. This possibility points towards possible next steps.

While the members of the PMS will still bear a significant part of any deficit in the final balancing of the books, they should record the benefit that an even larger devaluation of members' funds was avoided.

Members (not equally) should receive a return of about 80% of their savings.

A further critical question is whether the decision by Government, with permission from HM Treasury, to provide the emergency loans, together with repayment terms, was appropriate.

In defence of the Government actions, the case can be made that, during the same period, banks were rescued and depositors were protected.

In more critical vein, no organisation such as a credit union called for and merited Government assistance. Has Government set a dangerous precedent? How will the Government Auditor respond?

Belfast Telegraph