Mutual societies have been a part of the UK economy since the 1800s. They were originally set up so members could pay into a shared fund and get benefits if they were ill or when they got older.
Mutuals became very popular with workers. At a time when bank accounts were not available, it’s believed there were around 27,000 registered mutual societies in the UK.
They were popular because they were owned and run for the members’ benefit. This allowed members to take more control of their money.
The number of mutuals went down after the Welfare State was introduced in the 1940s. But it was estimated that as recently as 1995, over half of the UK’s insurance industry was still mutual.
Shepherds Friendly is a friendly society, which is a specific type of mutual society. We’ve been putting members first since our society was founded on Christmas Day, 1826.
How do mutual organisations differ from banks?
Banks are often listed on the stock market. They are run for profit and to benefit shareholders.
Mutual societies, on the other hand, are run purely for their members.
Members are the owners of the business. Each member has a vote and a say in how the society is run. They can attend and speak at AGM meetings and help with important company decisions.
Mutuals do not have external shareholders to pay. The money they make is reinvested to for members.
The table below highlights the key differences between banks and mutuals.
| Feature | Banks | Mutuals |
| Ownership | Generally owned by shareholders, often listed on stock markets | Members (customers) are the owners |
| Decision-making | Shareholders influence strategy through profit-driven boards | Each member has a vote and can attend AGMs to influence decisions |
| Profits | Profits paid out as dividends to shareholders | Profits are reinvested into products, services, and member benefits |
| Primary focus | Short-term profitability and shareholder return | Long-term member value, financial security and community benefit |
| Accountability | Accountable to external shareholders | Accountable directly to members |
How does a mutual society contribute to the UK economy?
Even though there are fewer mutual organisations in the UK these days, they still play a valuable role in the economy.
Their main values generally include:
- Building trust: They help spread wealth and rebuild public trust in business.
- Creating diversity: They offer an alternative to profit-seeking companies.
- Giving choice: They provide competition and choice for members.
- Operating for the long term: They use strategies aimed to keep them accountable to users and the public.
How do the benefits mutuals provide differ from banks?
Difficulties faced by some of the biggest names in the UK financial market may have had a negative effect on public trust in some commercial organisations.
However, the main aim of a mutual is to put members’ interests first, which has helped to restore trust. Because they are owned by and answerable to their members, their main goal is to improve the products and services they offer, not to increase profits for shareholders.
Here are the main benefits of a mutual, compared to a bank:
- Trust and transparency: Decisions are focused on customer needs, not shareholder profits.
- Financial stability: They are structured for the long term and avoid risky short-term strategies.
- Social responsibility: Profits are reinvested into the community and for member benefits.
- Customer service: Research shows customers are more satisfied with the staff and service at mutual societies.
The product benefits of being part of a mutual are highlighted by our Income Protection plan claims rate.
Why choose a mutual over a bank?
- Member-first approach: Decisions are based on the members’ needs, not external shareholders.
- Long-term security: Mutuals try to avoid high-risk strategies that have caused instability in some high street banks.
- Community focus: Many mutuals reinvest in local causes and support regional economies.
- Better service: Surveys show higher customer satisfaction among mutual members compared to bank customers.
- Shared values: Mutuals often promote financial wellbeing, education, and ethical responsibility.
For a deeper look, see the differences between saving in a mutual and bank.
Key points to remember
- Mutual or friendly societies are financial organisations owned by their members, not external shareholders.
- Unlike banks, mutuals reinvest profits to improve products and services, rather than paying dividends to shareholders.
- When you join a mutual, you become an owner with a say in how the society is run.
- This member-first approach leads to greater financial stability, better customer service, and a focus on long-term value.
To learn more about how we put our members first, watch our Mutual Moments TV advert or find out more about Shepherds Friendly’s history.
