The Presbyterian Mutual Society collapse a year ago has left members bereft and bemused as to how such a disaster happened, writes FRANCESS McDONNELL

IT IS HARD to put a price on faith but some members of the Presbyterian Church in Ireland have an exact calculation of what their own personal religious convictions have cost them in the last 12 months.

They are the former savers and members in the Presbyterian Mutual Society (PMS), which collapsed a year ago this month, leaving more than 10,000 people financially paralysed. Many still do not fully comprehend why a society, which had assets valued at more than £300 million (€329 million) in March 2008, suddenly failed barely nine months later.

But one of the fundamental reasons attributed to its failure is a simple crisis of faith. In the economic downturn and the subsequent credit crunch, members of the society lost confidence in the belief that their investments were secure.

The PMS had not been regulated by the UK’s Financial Services Authority nor had it been protected under the UK treasury bank guarantee scheme. Instead the society had been set up in 1982 solely “to promote thrift among members of the Presbyterian Church and to create a source of credit for the benefit of its members at a fair and reasonable rate of interest”.

Membership of the society was exclusive to Presbyterians who were actively encouraged by the Presbyterian Church in Ireland to participate in it.

Last June prior to the crisis at the society, the Presbyterian General Assembly passed a resolution encouraging “congregations and individuals to avail themselves of its [the society’s] services”.

Since its collapse, however, the Presbyterian Church in Ireland has repeatedly stressed that the church and the society were and remain two separate legal entities.

When Arthur Boyd was appointed as administrator to the society, he explained in no uncertain terms to members and savers why the PMS could no longer continue to trade normally.

Three clear issues had been identified by Boyd, including the fact that the demand for withdrawals by members of their investments exceeded its cash reserves.

Between October 27th and November 17th last year, the PMS received requests for withdrawals in excess of £50 million but the society had cash reserves of only £4 million at hand.

Boyd also outlined the fact that the value of the assets which had been invested in or secured by property had slumped in value and to a level below the value of members’ investments.

Finally, although PMS members’ investments could historically be drawn down on demand, the cash had been invested by the society in longer-term investments such as property and loans. What it all added up to was a crisis and it is a crisis that is nowhere near to being resolved 12 months down the line.

Countless pressure groups have been set up and endless meetings have been held on the subject by local and national politicians in Northern Ireland and London.

But the fact remains that neither former savers nor members have been able to access a penny of their money since November 17th, 2008.

For organisations such as the Howie Christian Charitable Trust, which is based in Northern Ireland but heavily involved in Christian charity work in Uganda, it has proved to be a disaster. The trust, which has an estimated £500,000 tied up in the PMS, now wants the High Court in the North to intervene in the process to find a resolution for stricken investors and savers.

The trust is just one of many of the organisations which have been forced to postpone and cancel projects as efforts to resolve the situation continues.

On a personal level the inability to find a solution has left individuals and families in despair. Harry Hume says he and his wife Margaret’s life savings, which amount to a six-figure sum, are being held to ransom in the society.

The retired farmer from Ballymena said he knows of many former PMS shareholders in his community who are distraught over what has happened and the fact there is no solution in sight to their troubles. Hume, like many others, worked hard all his life to enjoy financial security in his later days but now he says he has been robbed of that sense of security.

He is angry and deeply disappointed by what has happened in the PMS and he wants answers to his questions about who is to blame.

Hume says many members in the society believe there should have been more decisive action taken to avoid the crisis in the first place. “I believe steps should have been taken before the PMS had to go into administration and I do not believe that either the [Northern] Executive or the Gordon Brown government has done enough for us since then.

“No one wants to take responsibility. They have washed their hands of us. Make no mistake. There are many people, particularly elderly people, who are really suffering great hardship because of what has happened. What has happened is that the shareholders of the PMS have lost control and what we need to do is find a resolution pretty quickly.”

He says many people feel they have been deserted by the government and the church in this crisis.

But the moderator of the Presbyterian Church, Rev Dr Stafford Carson, believes it has provided strong pastoral support to members affected by the collapse of the society.

Carson said the church has played a very active role in trying to find a solution and has been in constant contact with key individuals in relation to the PMS from the Secretary of State through to Executive ministers and the administrator.

He says he shares the frustration of members of the Presbyterian Church in Ireland that it has taken so long to find a possible resolution to the crisis at the PMS. As a “man of faith”, he says he trusts, hopes and prays that a solution can be found.

Dr Carson believes the best outcome for shareholders in the society would be for a larger financial organisation to take over the society which would enable members to recover their investments and savings.

This is just one of a number of options that have been put forward. There are also discussions ongoing concerning a potential intervention by the UK government to rescue the society, albeit within strict adherence to European Union legislation.

The preferred option appears to be that a bank could be persuaded to step in and take over the society with perhaps the promise of a government guarantee to provide security.

A UK ministerial working group set up by the British prime minister Gordon Brown to investigate potential solutions to the society’s problem is expected to deliver a draft report outlining its recommendations to the British prime minister within weeks.

The group includes representatives from the Norths Department of Finance and Personnel, Department of Enterprise and Trade and the UK treasury.

In the meantime an investigation by the UK’s disciplinary body for accountants and actuaries into events leading up to the society being placed in administration is now under way. The Accountancy and Actuarial Discipline Board intends to exam the conduct of members of the Institute of Chartered Accountants in Ireland (ICAI) and of Moore Stephens Chartered Accountants in Northern Ireland in relation to the PMS.

Former savers and investors had hoped they might receive some form of a payment from the administrator by Christmas.

The society still has capital coming in from investments and ongoing business activities. But it looks unlikely that the administrator will be in a position to distribute funds at this stage. For people like Harry Hume and his wife, all they have left now is their faith that prayers regarding the PMS will be answered.

Presbyterian Mutual: timeline

October 25th, 2008:

An emergency meeting of the Presbyterian Mutual Society board of directors is convened and it resolves to stop payments to members.

November 6th, 2008:

The society board of directors decides that the society should be placed into administration.

November 14th, 2008:

Emergency legislation is passed by the Northern Ireland Executive to enable the society enter into administration.

November 17th, 2008:

Arthur Boyd is appointed as administrator to the society.

January 12th, 2009:

The administrator writes to former members and shareholders of the society to recommend that the society's existing business should be wound down in a managed and orderly manner through a formal arrangement with its members.

February 6th, 2009:

Boyd informs former members of the society that they have voted in favour of his proposals.

June 15th, 2009:

In a six-month progress report to former members, the administrator confirms two parties who have expressed an ongoing interest in the assets of the society.

He also reveals that he has discovered there could be a £72 million (€80 million) shortfall in the loan book as a result of the crash in property values.

June 17th, 2009:

British prime minister Gordon Brown sets up a working group to try to find a solution for former savers and borrowers.

August 5th, 2009:

The UK Accountancy and Actuarial Discipline Board launches an investigation into the conduct of members of the Institute of Chartered Accountants in Ireland and of Moore Stephens Chartered Accountants in Northern Ireland as auditors to the society, in connection with events leading up to it being placed into administration.

December 2009:

The administrator is scheduled to present a half-yearly progress report.