Tax exempt savings

Lorna_Dean_Gibbs

???I've just received information about tax exempt savings applicable to the whole family.Firstly, I wasn't aware that the Government was allowing this extra tax exempt saving opportunity over and above ??? the ISA entitlement....but secondly, the company who sent the info is called "Teachers" but the charges on the policy look quite high. Has anyone taken up this extra allowance (£25.00 per person, including children) and any suggestions on the best company for a policy? Martin..over to you!

cloud_dog

Teachers are one of a little known band of financial companies known as "Friendly Societies" - Liverpool Victoria being the largest (not sure if they've recently changed their name??).

Anyway, Friendly Societies have been around for a long time and originially came in to being in order to help the poorer / less well off people. They were (are) basically run like a collective, members invest money and these monies help to supply the memebers with Sickness cover (that's how they started out, and still probably do) or future investments, very similar to larger life assurance companies, except they are allowed to run investment vehicles that are tax-exempt. Not only are you exempt from any tax implications of your investment but the society actually runs the fund(s) without incurring tax liabilities.

Because of this the investment amounts are pretty restrictive (£25 pm, or the an anual lump sum). Their charges do tend to be quite high though.

Sorry I couldn't be much help but I don't like recommending investments to people.

cloud_dog

deemy2004

Full info on friendly societies

http://www.afs.org.uk/homepage.htm

dunstonh

Friendly societies are Friendly by definition.
Their charges are high.
I think the charges might cancel out the fact that the account is tax free.

It would be fair to say that. Plus many of them are not exactly brimming with financial strength and you end up in their with profits fund.

Milarky

Apart from ISAs [and FS] National Savings & Investments offers a range of 'tax free' accounts:

http://www.nsandi.com/index.jsp

Rates are poor naturally [this is the NHS your are supporting!] but being 'tax free' have certain advantages in the same way that ISAs do [eg income disregarded under working tax credit and child tax credit rules]

isasmurf

Cloud dog is right, most NS&I accounts are paid gross, but must be declared to the taxman who will either collect the tax through your tax return or amend your tax code. I think the only tax free products offered by NS&I (other than ISAs) are Savings Certificates and Premium Bonds.

Milarky

Sorry, I didn't mean to imply that all NS&I cash based accounts were 'tax free', merely that they offer a range of accounts which are tax free [There's also an account for children in this group]. It is notable that they don't collect the tax themselves on the other accounts [i.e those that are taxable] and probably this is partly historic. However, NS&I are owned ny HMG and therefore don't need to compete on equal terms with the banks etc. By the simple 'trick' of paying rates gross they may genuinely mislead a few people into thinking that they are saving tax whereas they are simply deferring it!

MJSW

They do deduct tax on some of their accounts (the fixed rate bonds). There are broadly three categories of account with NS&I:

1) Tax free accounts
2) Taxable, but paid gross
3) Taxable, and paid net

Just to add to the confusion, there's also the Ordinary account which is taxable, but the first £70 is tax free. ???

It is a bit of a mess. They should simplify the whole thing and just have taxable accounts which are all paid net (unless there's an R85 in place) plus the tax free accounts .

deemy2004

The index linked certificates are tax free

isasmurf

They stopped offering the Ordinary account last Christmas and converted all existing Ordinary accounts to Easy Access Savings Accounts in July.

MJSW

The Ordinary Account is no longer available, but it is completely incorrect to say that all the remaining accounts were converted to Easy Access Accounts in July. From 31 July 2004, no further deposits can be added to Ordinary accounts, but they have not been automatically transferred to the Easy Access account.

On 31 July 2004, there were around 12.8 million Ordinary accounts still open according to a National Savings press release. National Savings was encouraging remaining account holders to switch, but many have still not done so.