with-profit funds tax-free savings/investments

innovate

Been searching the main site and the forum but couldn't find anything that appeared relevant.

Saw a flyer from nationalfriendly.co.uk in a Waitrose mag and thought this sounds interesting but I'd better check with the MSE wise people.

They tout a tax-free savings plan but I think it's a hybrid between savings and investments since there is no interest payments. Instead you might get a bonus (depending on performance of fund), and they say you will get at least as much as you paid in when your policy matures. Anything above your paid-in money is tax-free, though the max you can invest is £25/mth. Plus you can get £15 John Lewis vouchers if you quote code WF1209.

Questions:

1. is it sensible to exploit this tax-free offer?
2. is nationalfriendly.co.uk the best place to do this with or are there other mutual societies that have better offers?
3. is the investment covered by the £50K FSA guarantee? they say they are regulated by the FSA, but that doesn't mean there is any guarantee, IMO.

opinions4u

They tout a tax-free savings plan but I think it's a hybrid between savings and investments since there is no interest payments.

It's an endowment policy. More or less.

Anything above your paid-in money is tax-free, though the max you can invest is £25/mth. Plus you can get £15 John Lewis vouchers if you quote code WF1209.

A John Lewis voucher that would cover the cost of a couple of pairs of socks is no reason to commit £3,000 of your money to a poor value plan over the next decade.

1) No. The tax advantage is tiny and wiped out several times over by charges.
2) They are all rubbish. High charge, poor performance, often pay out less than you pay in - this one has a guarantee which will stifle its growth potential.
3) No. They are covered by the FSCS as an investment - first £30k covered plus 90% of the next £20k.

Bin it. Move on!

dunstonh

I concur with opinions4u.

These should have been killed off years ago or should have at least adopted more modern charging structures.

The tax free thing is a red herring as there is so little advantage. Yes you have no further liability for income tax and there is no CGT but then most people dont pay CGT.

S&S ISAs are better value and potentially more tax efficient.

They are an investment product. They are not a hybrid. You can get back less than you pay in.

innovate

Brilliant, thanks guys. Glad I asked before I committed "just £25" a month! Flyer duely binned.

Might have to get to grips with those S&S ISAs after all, though I am still reeling from losing a lot on my last investment ISA.