Friendly Societies

kikouno

Hi, I'm looking to join a "Friendly Society"

I've applied for Engage Mutual's Easy Save plan online and will get the information trough the post one of these days. I am looking at £25 per month for a 10 year period.

I have never heard of "Friendly Societies" before and would like some advice before I commit to this as I am aware if I cancel I might get less than invested.

I read their terms and conditions and it sounds reasonable. Anything tax exempt is a good thing in my eyes. :j


What advice would you give about Friendly Societies and about Engage Mutual?

Also, can I have more than one of these accounts?

Thanks in advance

Reaper

This comes up regularly. Use the forum search tool and type in "Friendly Society" to see the forum view.

In brief the charges are too high for them to be worthwhile.

EC12345

Hello. I have a policy with a friendly society which I took out 10 years ago - paying £20 per month. It is due to mature in September - I would have paid in £2,400 but I rang up yesterday to find out it is only worth about £2,284!! :eek: Am really disappointed. After googling, I've found really bad reviews about friendly societies. At least I'll get something back but I would have done better to put the cash under my bed!!!

kikouno

Reaper wrote: »

This comes up regularly. Use the forum search tool and type in "Friendly Society" to see the forum view.

In brief the charges are too high for them to be worthwhile.

Thank you.

Just been reading some of the older posts and it doesn't seem so appealing now. High Charges??:eek:

Why brand the product as tax free then add charges to it? Very misleading.

kikouno

EC12345 wrote: »

Hello. I have a policy with a friendly society which I took out 10 years ago - paying £20 per month. It is due to mature in September - I would have paid in £2,400 but I rang up yesterday to find out it is only worth about £2,284!! :eek: Am really disappointed. After googling, I've found really bad reviews about friendly societies. At least I'll get something back but I would have done better to put the cash under my bed!!!

It is very misleading and I can understand your frustration. I will steer away from it now.

Thanks for the advice

dunstonh

Why brand the product as tax free then add charges to it? Very misleading.

Not misleading. Just old fashioned.

These products were designed in a high inflation, boom/bust economy and priced with that in mind. They were also priced at a time when the charges on unit trusts were higher and less accessible to smaller investors.

EC12345

I mean I'm glad I'm getting something back in September just would have liked more than what I paid in - will never take one out again. I mean I'm by no means a financial person and really have no idea about investments etc.

On the figure I quoted, does anyone know whether the annual bonuses that I have received every year will be added on when the policy expires or are they included in the £2,284!! Should have asked but didn't think to at the time ....

kikouno

EC12345 wrote: »

I mean I'm glad I'm getting something back in September just would have liked more than what I paid in - will never take one out again. I mean I'm by no means a financial person and really have no idea about investments etc.

On the figure I quoted, does anyone know whether the annual bonuses that I have received every year will be added on when the policy expires or are they included in the £2,284!! Should have asked but didn't think to at the time ....

Are you within your 28 days of termination? If so I think you can get back at least all that you paid in if not mistaken, including fees.

It is guaranteed, according to their policy.

Give them a call. You might get back at least what you put in, inflation aside...:o

Milarky

dunstonh wrote: »

Not misleading. Just old fashioned.

These products were designed in a high inflation, boom/bust economy and priced with that in mind. They were also priced at a time when the charges on unit trusts were higher and less accessible to smaller investors.

Can you explain this concept of something being 'priced at a time'? Does this mean the saver is still paying a big 'bid-offer' spread applicable (say) to products of 10 years ago - which they would not be asked to bear if taking out the same product today - and that the FS isn't benefiting from all the changes in market competition since - and therefore they are simply passing on the cost of a 'fixed price contract' they have to their own customers? Would the 'same' FS policy taken out now look a lot different charge-wise?

EC12345

kikouno wrote: »

Are you within your 28 days of termination? If so I think you can get back at least all that you paid in if not mistaken, including fees.

It is guaranteed, according to their policy.

Give them a call. You might get back at least what you put in, inflation aside...:o

Thanks. The policy expires on 1 September. They will write to me 6 weeks before termination (so at the end of July) with the final settlement figure .... :eek:

dunstonh

Milarky wrote: »

Can you explain this concept of something being 'priced at a time'? Does this mean the saver is still paying a big 'bid-offer' spread applicable (say) to products of 10 years ago - which they would not be asked to bear if taking out the same product today - and that the FS isn't benefiting from all the changes in market competition since - and therefore they are simply passing on the cost of a 'fixed price contract' they have to their own customers? Would the 'same' FS policy taken out now look a lot different charge-wise?

Products are designed by committee and cost millions of pounds to bring to market. Indeed, one insurer reckon that a major product launch can cost close to £1 billion. A tweak in the wording on the policy can cost £200k. The smaller more modern contracts tend to be more efficient as they havent got legacy systems and ways of doing things.

The Friendly society plans were designed decades ago and the friendly societies tend to work like the insurance companies in the way they launch products.

The big up front charging model was in place because inflation was such that if you didn't take your charges up front, inflation would erode the value away much quicker than it does today. Just ask those that bought a house in the 60s or 70s when their mortgages (and therefore endowments) were in the hundreds of pounds or low thousands. 15 years later they were 10-15 times more but the insurance company still had to administer a policy that was based on the value 15 years earlier.

When we moved to a steady low inflation economy, you didnt need to have big up front charges anymore. Computerisation helped as well allowing the modern companies to set up with software that is easier to change products on. Companies with lots of legacy business or lower cashflows find it harder. Just look at Aviva as an example. The admin in their modern life and pension contracts is fine. On legacy contracts its a nightmare. They have spent billions on computer and software and still cant get an ideal outcome. The friendly societies dont have the money to spend in the same way.

So, basically you end up with a product that has inbuilt pricing that was designed for a high inflation, boom/bust economy that does badly in a low inflation economy.

Remember they are using the endowment pricing model. The main reason endowments failed was that they were caught out by long term low inflation.