Savings Schemes with Friendly Societies

sdj1969

Hi

Scottish Friendly tell me I can invest £25 per month tax-free on top of any ISA and it includes Life Cover.

Anything I should be aware of / need to know?

Many thanks.

sdj

Chadsman

The charges eat up any tax advantage and more.
Personally I would not touch 'em with a barge pole.

edinburgher

The charges eat up any tax advantage and more.
Personally I would not touch 'em with a barge pole.

What he said. I personally paid into one of these for nearly 3 years before closing it (and losing my contributions). Figured that it was performing so poorly due to fees that the opportunity cost of the £300/year it was costing wasn't worth the faff. You'd probably be far better sticking £25/mth in a low TER index tracking fund held within an ISA for 10 years.

jimjames

It may help to explain why you are considering it?

Have you maxed out your full ISA allowance? Do you just want to invest £25 a month as it is the total you can afford? Are you higher rate taxpayer?

I can't see any reason why these highly expensive, inflexible plans are of much use to anyone but the answers to the above questions may assist in suggesting alternatives.

dunstonh

Should have been killed off years ago. Tax free status is a bit of a red herring (as CGT is unlikely on such a small amount and the credit means basic rate or lower tax payers dont see any real benefit apart from on fixed interest holdings). Charges on these plans are the type that were seen back in the 80s. S&S ISA trumps these plans.

baby_boomer

Charges are excessive.

The sooner these organisations are forced to shut their doors, the better for savers and investors.

Please don't encourage them to continue.

sdj1969

jimjames wrote: »

It may help to explain why you are considering it?

Have you maxed out your full ISA allowance? Do you just want to invest £25 a month as it is the total you can afford? Are you higher rate taxpayer?

I can't see any reason why these highly expensive, inflexible plans are of much use to anyone but the answers to the above questions may assist in suggesting alternatives.

Many thanks for all the replies to this, my first post. These things don't get much good press, but to answer the questions above:
Yes, maxed out Cash ISA allowance
Could afford more, £25 was the amount advertised by Scottish Friendly
Yes, higher rate tax payer

Loughton_Monkey

sdj1969 wrote: »

Yes, higher rate tax payer

As higher rate taxpayer, and want to invest more, the surely pensions are the ideal vehicle? £60 paid in is £100 invested. Can't be bad.

dunstonh

Yes, maxed out Cash ISA allowance
Could afford more, £25 was the amount advertised by Scottish Friendly
Yes, higher rate tax payer

S&S ISA trumps the friendly society plan.
Pension could trump the S&S ISA depending the objective.

jimjames

You've maxed out your cash ISA allowance but presumably not your share ISA allowance. If you are prepared to commit to a 10 or 15 year savings plan why not use the money in an ISA instead. Far lower cost and far more flexible as you can start/stop/vary payments as you want.

They generally start from £50 per month but the amount doesn't sound like it is the issue. Typically with friendly society plans you are paying most of the first year's contributions in charges and cannot vary your payments if your circumstances change.

An ISA is a far better option as it has none of these pitfalls.

kidmugsy

We've had several over the years. The only one that was really successful was a Child's Plan from the Ancient Order of Foresters FS: not only was the return good, but they gave our daughter a small bursary when she went to university - enough to be helpful for book purchase.