Friendly Society ISA - How safe?

dlorde

I have an ISA with a Friendly Society, and recently checked the interest rate on it. I was told it is still earning 10% minus 3% admin charges, and that I'll be informed if it changes.

It seems to me that this is clearly an unsustainable rate, so I'm worried that my money may not be safe. Are these Friendly Societies covered by the Financial Service's Compensation Scheme, or any other guarantee?

dunstonh

I was told it is still earning 10% minus 3% admin charges, and that I'll be informed if it changes.

Ask for that in writing as that is unlikely

Are these Friendly Societies covered by the Financial Service's Compensation Scheme, or any other guarantee?

They are but what level depends on the type of product. You say interest rate so that suggests cash ISA. However, cash ISAs dont have explicit admin charges. Charges on savings accounts are implicit.

So, what product is it?

dlorde

It's a mini-insurance ISA that converted to a stocks & shares ISA when the rules changed a while back. However, still they work it on a declared percentage return. Up to now, the account valuations have corresponded to the declared rate.

cos69

dlorde wrote: »

It's a mini-insurance ISA that converted to a stocks & shares ISA when the rules changed a while back. However, still they work it on a declared percentage return. Up to now, the account valuations have corresponded to the declared rate.

I cannot believe what your being told is accurate for a Friendly Society "stocks & shares ISA" over the last 12 months, you need to check the 7% they are quoting is the actual return and not the figure they are giving you as illustrative of potential future returns. If its stocks and shares its not an interest rate surely ?

dunstonh

Its current status is a with profits fund invested in a stocks and shares ISA. That would mean it gets insurance FSCS protection.

There is no interest paid on these. They are paid in the form of a daily (reversionary) bonus and a additional (final or terminal) bonus. Charges are not normally explicit on these but implicit. So that makes the 10% interest rate and 3% charges figures seem suspect.

dlorde

As I recall, it was originally an insurance ISA paying 10% minus 3% admin. When the rules changed last April, the society said the category of the ISA would change, but that from the saver's POV, the same interest rate and admin charge would still apply. Yesterday, when I checked the rate and expressed surprise it hadn't changed, the valuation I was given did match those figures.

Unfortunately, I don't have the documents here at the moment, so my I memory may be faulty, but I'll look them out when I get home.

dlorde

I was slightly mistaken - the rule change that affected the original Mini Insurance ISA was the 2005 ISA rule change.

The statements I get are still headed 'Mini Insurance ISA', and the interest rate on the last statement (March 2008) is 10% with a charge rate now at 2%. The Society web site description of the product is now as follows:

Mini Insurance ISA
This was the insurance component of an Individual Savings Account. The Stocks and Shares ISA is a tax-exempt, saving with profit, life assurance policy.

This is the product in question.

I'm really just concerned whether I am reasonably safe to leave the money (~20k) in place (although no doubt the rate will drop at some point), or whether it would be prudent to move it elsewhere - e.g. a bank covered by the full FSCS guarantee...