Friendly Society 1st time invester

oldtractor

I hope I can find some help here re our potential investments.
We are on a low income but have a little rainy-day money put by in an ISA. We are thinking of investing £15 a month with a Friendly Society in a tax free scheme. We like this idea as its long term "cant get our hands on it" its too easy to dip into the ISA we find. Also it involves investment rather than savings and we quite like the idea of dipping a toe into the stockmarket, bonds,etc.
We are thinking of investing for at least 15 yrs.
Any thoughts welcomed please. We've never done this before.
Mr and Mrs OT

dunstonh

We are thinking of investing £15 a month with a Friendly Society in a tax free scheme.

Obsolete dinosaur of product which is expensive and has the tax free part is a red herring as it offers virtually no value to the product.

Also it involves investment rather than savings and we quite like the idea of dipping a toe into the stockmarket, bonds,etc.

You are not really dipping your toe into the stockmarket. You are dipping your toes into a product that shares more in common with an endowment policy then a modern investment product.

Any thoughts welcomed please. We've never done this before.

Avoid like the plague. On the advised front, my compliance company now suggests that advisers should not recommend them as they would likely be considered mis-sales a lot of the time compared to modern options (S&S ISA being the main one). Direct sales/mailshots often carry on many years after a product has gone obsolete as they have no duty of care on the suitability of the product for you.

bigadaj

Not a fan then dunstonh.

Dunstonh is exactly right, they claim to be tax efficient but their charges are so high that you will get less back than if you had left your money in a. Bank deposit account.

The problem is that £15 a month is very low, many funds have £50 a month or more minimum. If you can afford say fifty quid then consider something like a hsbc tracker fund with low charges, if you can't the you're probably better off saving in a despot account until you have built up a decent sum.

oldtractor

Thank you both for your replies. I'm glad I asked. I know £15 is a low figure but TBH the fact that these funds allow such a small amount was an attraction. I really dont know what to do now for the best. We'll look into the HSBC tracker fund.
We would really like something which isnt in the UK wholly something investing in a mixture of shares property bonds etc. The Foresters Friendly Society have one of these accounts. It appealed until I read the replies.

dunstonh

Not a fan then dunstonh.

Some financial product firms continue to retail products they know are obsolete. Endowments went obsolete around 1995. Most adviser firms stopped by 1998 with a few stragglers into 99/00 but the direct mailshot ones carried on well into the mid 2000s.

Friendly society plans are the same. Advisory firms are now avoiding them but the direct mailshots/marketing still sell them.

I just looked at the charges on this product. Remember that this is a non-advice product so has no cost of advice factored in. The charges equate to 3.6% p.a. You have to go back to the 80s and 90s to find that level of charge being acceptable. There is no excuse for that level of charge in the advice market let alone direct market.

oldtractor

Thank you dunstonh. re amount of £ . We really do only have £15 a month to invest. Is a company like HBC, Barclays or Fidelity likely to have a product in which to invest so little?
Also would a stocks and shares ISA be a better idea? --I am thinking so.
ETA I've had a quick look at Virgin ISA. Will spend some time tomorrow researching.
Thanks once again for the advice.

jason1231972

I have £15.00 per month going into an account with Forresters Friendly. I took it out a while ago with no advice as such, I just liked the idea of it being untouchable. I do now realise that I'm flogging a dead horse, but can't really be bothered to check the implications of how much money they'd take from me if I cashed it in now, if I can at all. Something I must get round to.

On a somewhat similar note (naff savings plans), my mum had an over 50s plan with Engage Mutual. Sum assured, over £5,000. We nagged her for a couple of years about how naff these plans were, etc., and how she could end up paying in a lot more than it paid out upon death. As it happens, she passed away just over 2 years into the plan, having paid about £500 into it. So, we 'won' that game, but obviously someone had to die prematurely! (sorry for the morbid tale!).

Re: small savings and investments...

...most straighforward monthly/regular savings accounts will accept this amount and will effectively be inaccessible (you can close the account in dire straits and grab the cash, but they make it harder to access on a whim). They generally accept between £10-£250 per month, depending on the product. They have 'good' headline rates (but run a calculation first to ascertain exactly how much interest you'd receive), with no risk to capital (save for the effect of inflation). They generally run for a year at a promotional rate, after which you can just start feeding into another similar account.

Like most other deposit accounts of any variety right now, your return will be very limited (even uneconomical, depending upon inflation, etc.), but they are devoid of any kind of charges and fees, which can really take a chunk out of smaller savings.

jimjames

Great comments from others that echo my views. Avoid like the plague as they are such poor value.

Pretty much any S&S ISA will have a min monthly investment of £50 so that sounds like it is above your limit. If you have kids then a child investment trust plan starts at £25 per month and will get you a stock market based investment with a global investment trust giving a good spread across the world.

It would be far lower cost and completely flexible unlike the friendly plan. You can access the money but it isnt so easy and such a plan is designed for the long term.

jem16

oldtractor wrote: »

ETA I've had a quick look at Virgin ISA.

Please don't look at a Virgin S&S ISA. It's about one of the worst you can choose - probably just lies behind the Friendly Society investments.

dunstonh

Invesco perpetual and M&G both can do £20pm on their funds.

barrowc

I had one of these with Scottish Friendly from Oct 2000 to Oct 2010. £25 per month x 12 x 10 = £3000 total investment.

The payout was around £3290. I think from using the savings calculator on this site (can't post links - sorry) that's less than a 2% return.

If we take into account the tax I would have paid on other investments, an average return of 2.3% or better would have beaten the friendly society. The performance of the friendly society investment seems pretty dire to me so my first experience of them will also be my last