Scottish Bond

schander

Hi,

My Uncle recently recieved some information from Scottish Friendly Assurance about the Scottish Bond. It talks about being tax free at the end of ten years. He asked us to look into if it was worth saving in.

I did do a search on the Scottish Bond across this site and only found 1 reference but that did not really explain how it worked.

So my question is, How does it work and is it a good investment(it's only 25 pounds a month)? or are there better ways to invest the money??

We do save our full 3K in a mini cash ISA.

Thanks
satpal

SeanW

Somebody who knows more about these things than I can explain better.

But this is with-profits investment, you might look this up.

http://www.scottishfriendly.co.uk/scottish-bond/scottish-bond-key-features.pdf Is the key features for this policy.

ManAtHome

As Sean says, likely to be "With Profits" which could be as low as 0.05% pa - no comeback, no withdrawals without penalty. You're quite likely to do as well if not better in a regular saver or standard savings account.

dunstonh

Friendly society with profits funds tend to be better than the [ex] big insurers. Smaller funds can be more dynamic and easier to manage than huge monsters. That said, the bigger issue with these types of plans are the charges. They will far higher than the tax saved and combined with relatively low potential growth funds, they really should be avoided.

Slim

Have a look at the charges.

These type of bonds issued by Friendly Societies which are tax free and on which there is a ceiling on premiums have massive charges.

ReportInvestor

I agree with Slim.

The key thing to note is the RIY (Reduction in Yield) on the projected returns that come with the accompanying literature.

Why should you pay 2-3% in charges (assuming this is the case) on an inflexible investment?

Regarding performance, a Scottish Friendly 10 year with profits endowment for £500 pa (compared to your £300) did at least come in above average for the 10 years to June 2006 but the return was only £1500 on £5K invested - which works out at 4.7% pa.

schander

Thanks for the replies. I think i'll leave them alone for now.


Thanks
satpal

pfpf

i am really glad about this post, and with out hijacking would like some advice.

i took out the very same policy in oct 2009, so 3 years to run. paying in £50.00PM (50/50 me and OH).

i took this policy before really understanding finance and investments.

i suppose what i want to know is, is there anyway of working out an uptodate figure i may receive at maturity?

i get the annual statements but they dont really tell me much other than the rubbish bonus thats been added in the last few years.

what about this final payment on maturity etc?

any help/advice/pointers would be great.

thank you.

ReportInvestor

All I can do is point you in the direction of that £500 pa policy example to June 2006 that I quoted above.

The returns there may be higher than yours as the charges on two £25pm policies are likely hit your joint investments harder. (Do you have information about the RIY % from your initial documents?). Also a pa example will perform more than a pm example.

On the plus side, if the stock market performs in 2006-8 you might even do slightly better than my example of 4.7% growth.

Does your recent account literature give an indication of the % of the with profits fund invested in shares(equities)/property/bonds/cash?

This would be helpful in assessing the potential of your fund. My guess is that Scottish Friendly has a reasonable % of shares and so that if the stock market performs between now and maturity, you have cautious reason for optimism.

pfpf

thanks RI.

i will look at my documents and see if any of that info is available.

pfpf.