£20 a month for 10 years ?

Johnny_Hamster

I'm looking for somewhere to stick £20 or so a month and forget about it for 10 years - somewhere I won't be able to dip into it. Any suggestions ?

MikeLB

I have a policy with a company called Scottish Freindly. Its more of a life assurance style policy but they do have others. You pay in a set amount each month and get awarded a bonus each year. The savings are tax free as well, on top of your ISA allowance.

I have 2 with them, one at £25 a month for 10 years, another at £20 a month for 15 years. YOu are tied in as if you withdraw you loose bonuses and they take a charge as well IIRC. At least you get a guranteed sum at the end and its such a small amount, you can literally set up the direct debit and forget about it.

SeanW

MikeLB wrote:

At least you get a guranteed sum at the end and its such a small amount, you can literally set up the direct debit and forget about it.

Just to make that point clear, that guaranteed sum is less than the money you have put in though.

MikeLB

But once your bonuses are issued, they cannot be removed so your guranteed sum increases each year. You can also get a final bonus when the policy matures. Also, there are different ways to save such as monthly and yearly lump sum.

As with any investments, policies vary and values can go down as well as up and you may recieve back less than you put in - Common Sense as applicable to all financial products.

savingpennies

Sounds like an endowment policy. I took two of these out for my kids when they were born. Looking at what they are worth and the amount I have actually paid in I think I would have been better with a building society account. the money in these is usually invested, I think, in shares/units so their value can go up as well as down.
I started out saving £20 a month when TESSA's first arrived on the scene and I still have them although now they classed as ISA's. I'd stick the money in an ISA and then you know what it is worth - yes you can withdraw the money but you lose the tax advantge if you do.

SeanW

I'm not saying the Scottish Friendly one is any different to the others, just making that point clear. Not everybody who goes alone reads all the documents I fear.

Yes they invest your money, then distribute the profit to you, as they are a mutual, this is how their profits are distributed.

They take charges from the potential earnings, for instance, their affect of deductions shows that at the end of the first year, £300 is worth nothing after charges. They summarise with a 7% growth ends up at 3.6% net pa. Compare this to a current regular saver at 8-10% gross, or an ISA at 5% net.

cheggers

Johnny_Hamster wrote:

I'm looking for somewhere to stick £20 or so a month and forget about it for 10 years - somewhere I won't be able to dip into it. Any suggestions ?

My advise would be go with a regular savings account, Halifax pays upto 7%, some times there are 10% regulary savings account about, one the anniversary of opening the account they pay you your years money and interested, then you shove this money once a year in a top rate ISA.

Johnny_Hamster

Yes, I thought the regular savings account looked like a good bet, but the money might be too accessible.
I had a Homeownrs Friendly Sociecty plan from 1993 to 2003 which cost £18a month for ten years , only just made a return on that.

Midas

For such a small amount by far the best returns lie in regular savings accounts (as has already been mentioned). As these generally only run for a year, transfer the money out into an ISA at the end of each year and open a new regular saver.

If the money's "too accessible" you need to be more disciplined! Perhaps taking out the account with a bank /building society that doesn't have any branches near to you would help?!

cheggers

Please do not touch Friendly Societies or Endowment savings plans.

You will barley make any money on them

upton66

Depends if you want full access to all the savings at the end of the 10 years.

If you are about 40 years old I would stretch the budget to £39 and make regular paymenst through Hargreaves Lansdown into a SIPP. Your £39 willl be made up to £50 by the taxman. When you are 50 you can withdraw 25% tax free.

Otherwise I'd go for a Mini ISA, stockmarket based