Tax Free with Friendly Societies

twister6451 · 15 January 2008 at 3:43PM

I recently received a flier through the door from Scottish Friendly Assurance offering tax free savings if I invest up to £25 per month over ten years in their Scottish Bond. According to their web site you can make a lump sum payment of £2340.10 which they say, and I quote:
Lump sum funding
This provides a way for you to take care of all your premiums at once. Your money will be used to set up a lump sum funding plan which invests in Scottish Friendly's taxable fund and guarantees to pay the annual premium into your tax exempt Scottish Bond.
If you invest the maximum lump sum of £2,340, 10 annual premiums of £270 are invested in your Scottish Bond, taking the total investment to £2,700. The minimum lump sum of £1,560 provides £180 a year for 10 years - a total of £1,800.
Has anyone used this savings tool?
How do you rate it?

dunstonh · 15 January 2008 at 3:58PM

Rubbish obsolete product which probably hasnt been killed off as most friendly societies appear to be Scottish and Gordon Brown doesnt want to destroy them (some are totally reliant on these obsolete dinosaurs).

They may be tax free but the charges are often 2 to 3 times more than that of a unit trust and easily wipe out the tax advantages. Plus most are limited in growth potential as they use with profits and there are only a few viable with profits funds nowadays.

In reality, its only higher rate taxpayers that would see a tax advantage anyway so the tax free bit is a little bit of a red herring.

twister6451 · 15 January 2008 at 8:55PM

Phew. Well thanks for steering me clear of that minefield. I'll look elsewhere.

Retired_I.F.A. · 15 January 2008 at 9:11PM

If we do ever see a renewed with profits market I'd expect the small friendly societies to lead the way as they have had virtually no misselling of mortgages compensation to pay out or pension compensation. Surely their with profits funds ae healthier than most?
I sold bucket fulls of Tunbridge wells exempt endowments (reg premiums never ever a lump sum) and their payouts made many a unit trust look sick but times have changed.

dunstonh · 15 January 2008 at 9:22PM

Some of them are healthy but just too small to be viable in the mass market.

their payouts made many a unit trust look sick but times have changed.

That is the key. Times have changed. Explicit charges are the way forward and unit trust range is so much more flexible.

EdInvestor · 15 January 2008 at 11:50PM

Retired_I.F.A. wrote: »

Surely their with profits funds ae healthier than most?

Yes they often are, the reason being unrelated to mis-selling but mainly to the fact that they mainly have only life funds, no pensions. Hence unlike the big lifecos they don't have a "GAR problem" forcing them to invest large wodges of the WP fund in bonds.

You wouldn't bother with them now though.

Tax Free with Friendly Societies

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