Festive deals are full of flaws

I ALWAYS try to keep a jaundiced eye open when the financial services industry is busy doling out dollops of seasonal cheer. Three big baubles last week were Wednesday's mortgage rate cuts, the Halifax's plan to pass on windfall shares to the families of members who die before the society turns itself into a bank, and a rather dry-sounding piece of financial engineering by a notorious privatisation-type invest- ment.

First, mortgages. Yes, millions stand to benefit, typically from February. But savers will pay. Most big lenders didn't move their savings rates last week, no doubt to avoid being lambasted as Scrooges just before Christmas. There were cuts on a few accounts here and there - in particular by the Co-operative Bank, which makes much of its ethical lending policy - and across most of the Norwich & Peterborough building society's range. But watch out for more, possibly as soon as the end of the month, slipped in during the quiet period between Christmas and the New Year.

THEN there's Halifax's potential pounds 100m handout of windfall shares to the surviving relatives of possibly 100,000 Halifax savers and borrowers who are expected to die before the actual payout.

My initial flippant reaction was that the huge numbers of people affected confirmed my view that the Halifax's conversion seems to be taking forever. Mid-1997 is the latest date pencilled in for getting shares, even though the conversion was announced more than a year ago.

What this is really about though is to avoid the bad publicity the Cheltenham & Gloucester received when it was taken over by Lloyds Bank. Up to 5,000 savers, the "C&G widows", were initially refused a share of the pounds 1.8bn payout because their husbands, the first-named on joint accounts, died too soon.

But is this really a little extra bit of heart-warming news from the Halifax? Not perhaps for the 10 million savers and borrowers who will survive to get the payouts. They would otherwise share this pounds 100m. Okay, it's only pounds 10 out of a payout of closer to pounds 1,000. But it's not as though this is just elderly widows who are the second-named persons on joint accounts. Heirs also stand to benefit, even if they had nothing to do with the account and even if they are already getting shares themselves. The Halifax plans to hand over shares to "personal representatives" of the dead saver or borrower.

The society says it wants as many people as possible to benefit from the share distribution. But if this includes customers' relatives, then why not all customers? There are thousands of loyal savers, such as those with Cardcash hole-in-the-wall accounts, who do not qualify for membership rights in the society and therefore don't qualify for the handout.

MY FINAL festive grumble is about proposals to improve the performance of one of the most hyped stock market investments aimed at small savers in recent years. Mercury European Privatisation investment trust last week announced it was planning a share buyback. Last month, the Independent on Sunday wrote about calls by financial advisers for the fund, and a similar one run by Kleinwort Benson, to turn themselves into unit trusts. After nearly two years of losses, this would allow Mercury investors to get shot of the fund with their original money back.

Mercury's latest proposals, sent out to the fund's 50,000 shareholders this week, amount to just half a Christmas card. The news of the buyback improved the price of shares in the fund, and the price may well improve further when the buyback actually takes place, which is planned for the new year. But investors are still losing money, and there is no guarantee the move will change this position.