Friendly society tax exempt savings

herwald

Hello - How can I compare premiums paid by different friendly societies? Is it correct that you can invest £25 per month tax free in them? what would be a reasonable return if i invested £25 over 15 year term?

Reaper

The high charges these companies make tend to more than wipe out any benefits from being tax free.

You can use a stocks and shares ISA to achieve the same thing with lower charges and still pay no tax.

rockitup

herwald wrote: »

Hello - How can I compare premiums paid by different friendly societies? Is it correct that you can invest £25 per month tax free in them? what would be a reasonable return if i invested £25 over 15 year term?

These have a history of giving less than reasonable returns, I did look at them first back in the 90's before I started investing in Investment Trusts.
If I remember rightly they were not even paying out as much as savings accounts.

Probably better sticking with a low cost tracker fund (not through HL) and taking your chances. Then you are not tied in and can withdraw without penalties if your fund has done quite well. Of course you do not get any guarantees with this method though.
Whoops Reaper beat me to it...

herwald

Thanks - how can I find the best rates for this type of ISA?

dunstonh

How can I compare premiums paid by different friendly societies?

Look at the reduction in yield figures they give. The greater the reduction in yield, the higher the cost.

Is it correct that you can invest £25 per month tax free in them?

Technically yes. However, their very high cost is more in line with 1980s prices and not current prices. Plus, the tax free status is a bit of a red herring as you would have to be a higher rate taxpayer and/or use up your CGT allowance every year to see a real benefit.

what would be a reasonable return if i invested £25 over 15 year term?

With one of these plans? Getting your money back would be a good result.

S&S ISAs will trump these obsolete plans.

how can I find the best rates for this type of ISA?

ISAs dont have rates. They are a tax wrapper. A container for holding investments of your choice. There are tens of thousands of investments you can place in an ISA and an infinite number of variations. You need to decide how you want to invest and who to do it through. Your small contribution of £25 does leave you a little short of choice. Most have a minimum of £50 or £100pm nowadays. However, there are still some, like M&G or invesco perpetual that will go down to £25.

longleggedhair

My mother has several endownments, and has always saved in them as her mother did. They have always produced good returns for her, however the latest maturities in recent years have been poor. The worst was a Royal Liver policy which lost around £300 despite being marketed as a safe product similar to a Savings account. Some policys can be ok. For eg I have a policy with Forresters which guarantees your capital and they do add (small) annual bonuses, however they pay discretionary benefits for optical and dental claims, which have paid me hundreds over the years.

Friendly Society plans are from a different age, but can be worth it if you take the right policy.

jimjames

If you can find a bargepole don't touch one of the friendly society tax free plans with it.

Poor value, high charges, inflexible, the list goes on.

There are far better places to put money that do not involve signing up for a fixed term with such high penalties for changing or stopping.

dunstonh

Just to put some perspective on these, my compliance company now treats these as mis-sales in most cases if done under advice as they are such poor value for money.

It is why you see so many of them done under direct sales without advice as they are so hard to justify on an advice process. Its a bit like the AXA endowments that went on for years after everyone else stopped doing them. They only did them on direct offer basis as that is largely caveat emptor. Or the cheek of the over 50s plans that said on the adverts "no salesman will call". Whilst trying to denigrate advisers, the actual reason would be that no "salesman" could justify them in most cases as better options exist.