Tax Exempt Savings Plans [TESPs]

planteria

masonic wrote: »

So these are not savings plans and not subject to FSCS protection?

What are they? Corporate debt? Equity investments?

you were comparing Investments in Friendly Societies with Cash Regular Savers, is that right? they are similar in that you can have your capital protected, but they are still 'Investments' rather than 'Cash Savings'.

planteria

and yes, now i see you get that they are Investments so not really comparable with Cash Savings.

i have Pensions and a Stocks & Shares ISA, and have a Regular Savings Plan and some TESPs alongside too. if an ISA is all you need, fine.. to each his/her own, but i like the with-profits consistency to sit alongside more 'risky' investments.

masonic

planteria wrote: »

and yes, now i see you get that they are Investments so not really comparable with Cash Savings.

i have Pensions and a Stocks & Shares ISA, and have a Regular Savings Plan and some TESPs alongside too. if an ISA is all you need, fine.. to each his/her own, but i like the with-profits consistency to sit alongside more 'risky' investments.

Yes, I think I have fallen foul of deceptive labelling of these products as 'savings plans'.

Obviously, with-profits investments and other structured products are available ISA-wrapped and unwrapped as well, so the question to ask is not whether or not these products are worth diversifying into alongside other investments, but rather whether what's available within this investment vehicle offers a net advantage over gaining exposure to the sector in another way.

Now I've had a little poke around a couple of friendly society websites to see what they are all about, and I've not been very impressed. The key question I had is what are the costs charged to investors for running these products and how to they compare to other options? The funds themselves are very opaque, which can be a sign that these products are not competitive, or poor performing on a risk adjusted basis.

One society allowed me to download an annual report, which I thought looked promising, but it turned out not to contain any accounting figures whatsoever. It is therefore entirely possible that any tax-efficiency in the investment vehicle is lost in inefficiencies within the underlying investment products. A case of the tax tail wagging the dog.

Happy to review any figures that suggest otherwise.

jimjames

planteria wrote: »

you were comparing Investments in Friendly Societies with Cash Regular Savers, is that right? they are similar in that you can have your capital protected, but they are still 'Investments' rather than 'Cash Savings'.

Why would you even consider an investment when the cash savings pay better returns that are guaranteed?

planteria

not convinced there is any deception, but i take your point..yes, a Regular Saving Plan and a Tax Exempt Saving Plan does include "Savings" not "Investment":) but they Are what They Are and i have always received very clear information prior to Investing, so there has been no risk of any misunderstanding.

i have a plan that is increasing by 58% of the funds i have invested in this tax year--but that is 'in return for' my commitment to keep investing in this plan for the long-term. that suits me, and it will consistently build over time, i will adhere to the plan, and it will offer something 'solid' alongside more 'risky' investments. if 'higher risk' over time equates to 'higher return' then that is fine with me:T. as i say, to each his/her own.

some here think they can demand answers from other posters, and make up lies if it suits their agenda too, but the reality is that we are just exchanging ideas or information here which each Borrower/Saver/Investor/Insurer here can use, but then it is their responsibility to consider information they receive carefully and make their own decisions.

planteria

which are you referring to jim? i use a Regular Saver with HSBC that is generating 6%. have just been accepted for the M&S Bank current account too, so may be having a further slice of that via the M&S brand too. but they don't role over and build up beyond a 12-month period. do you have other ideas?

masonic

planteria wrote: »

not convinced there is any deception, but i take your point..yes, a Regular Saving Plan and a Tax Exempt Saving Plan does include "Savings" not "Investment":) but they Are what They Are and i have always received very clear information prior to Investing, so there has been no risk of any misunderstanding.

From the ones I looked at I'd tend to agree the detail is clear enough, but I am surprised at the industry for persisting with the nomenclature. I did take issue with one of the plan's use of 'low risk', which probably isn't being used to mean the same thing as a typical customer would attribute to it, but far more heinous crimes have been committed by salespeople in banks and building societies peddling guaranteed equity bonds.

i have a plan that is increasing by 58% of the funds i have invested in this tax year--but that is 'in return for' my commitment to keep investing in this plan for the long-term. that suits me, and it will consistently build over time, i will adhere to the plan, and it will offer something 'solid' alongside more 'risky' investments. if 'higher risk' over time equates to 'higher return' then that is fine with me:T. as i say, to each his/her own.

So, if I understand correctly, you pay in £25 per month for (typically) 10 years into these plans. At the end of the first year, you get a 58% return on the £300 you would have invested at that point? So, £174? And this forms the guaranteed element of the plan? If so, this equates to 1.1% AER (if 10 years), which of course is lower than the risk-free rate you could obtain elsewhere (as jimjames has pointed out). But you are sacrificing some guaranteed return in exchange for the potential to earn a higher overall rate through payment of an annual bonus coming from the with-profits investment?

Nothing particularly unusual about that and it is to be expected of structured products with a guaranteed rate. However, you also have to consider the characteristics of the investment product that will hopefully lead to a bonus being paid over and above the guaranteed rate. This is the bit that needs to be critically evaluated before an informed decision can be made.

The product will contain a basket of investments, which will deliver a long term return along with the typical short term volatility. In order to smooth returns, some of these returns will be held back to supplement the bonus paid during downturns. Out of the returns will also come fees and expenses. The danger is that these could be very high and eat into returns, such that the non-guaranteed part of the returns from the investment does not offer good value on a risk adjusted basis (either the bonus paid is relatively low, or the bonus paid is unsustainable under challenging conditions). Charges and expenses will be very material to the performance of this part of the investment, so they need to be understood.

some here think they can demand answers from other posters, and make up lies if it suits their agenda too, but the reality is that we are just exchanging ideas or information here which each Borrower/Saver/Investor/Insurer here can use, but then it is their responsibility to consider information they receive carefully and make their own decisions.

Of course in an ideal world, people would fact check and not invest in anything they don't understand. The reality is that some people fail to look before they leap and may be more trusting of information posted here than they should be, or even fail to see where people could have a hidden agenda or ulterior motive. Misinformation is a bad thing, whichever side of the argument presents it.

planteria

masonic wrote: »

From the ones I looked at I'd tend to agree the detail is clear enough, but I am surprised at the industry for persisting with the nomenclature. I did take issue with one of the plan's use of 'low risk', which probably isn't being used to mean the same thing as a typical customer would attribute to it, but far more heinous crimes have been committed by salespeople in banks and building societies peddling guaranteed equity bonds.

ok that you are surprised. i consider my Friendly Society investments to be extremely low risk, as i will adhere to the plan, and so will receive an assured return on my investment on top of all of my capital. accepting, of course, that inflation will take it's toll...but then that is another case for Investment rather than Saving.

masonic wrote: »

So, if I understand correctly...

Sorry, no, you don't. i was referring to a different plan, which is larger than the TESP limits;). it is not a structured product and there is no guaranteed bonus to pay above/beyond. it is just this year's bonus, and once added it will not be taken away.

masonic wrote: »

Of course in an ideal world, people would fact check and not invest in anything they don't understand...

true. and i respect that you are engaging in a reasoned discussion above that of some contributors. the point i was making is that i am not obligated to provide answers, let alone misinformation;), to anyone. the only thing i would ever do is provide people who request it with information which enables them to make their own decisions.

colsten

planteria wrote: »

. the point i was making is that i am not obligated to provide answers, let alone misinformation;), to anyone.

why would you think anyone on here would expect you to feel obliged to provide misinformation to anyone? I certainly wouldn't.

planteria wrote: »

the only thing i would ever do is provide people who request it with information which enables them to make their own decisions.

That's excellent. Can I please request information which enables me to make my own decision, on the forum, not via PM. Thank you in advance.

masonic

planteria wrote: »

ok that you are surprised. i consider my Friendly Society investments to be extremely low risk, as i will adhere to the plan, and so will receive an assured return on my investment on top of all of my capital. accepting, of course, that inflation will take it's toll...but then that is another case for Investment rather than Saving.

The 'low risk' claims were being made about the underlying investments and sector in the statements I was reading and while true in the context of the stockmarket at large, it was a rather misleading statement to make in the absence of that context. This was not in reference to a product that guaranteed to return all of the capital invested, I hasten to add.

If you are investing in products that do guarantee to return all of your capital, then the risk is of course much lower, and perhaps the investment would be subject to some form of FSCS protection should the society fail. That's certainly worth checking, especially in light of a certain credit union that's the topic of another thread and is currently struggling to survive.

Sorry, no, you don't. i was referring to a different plan, which is larger than the TESP limits;). it is not a structured product and there is no guaranteed bonus to pay above/beyond. it is just this year's bonus, and once added it will not be taken away.

Well, in essence the monthly payment amount is immaterial to the effective rate of return. If the capital, plus this 58% return on the 12 month balance is the part that's guaranteed, then that represents an equivalent annualised return of 1.1% if you are making regular payments of the same amount over 10 years. Presumably you are expecting to receive returns in addition to this 58% in years 2,3,4...etc or you'd have been better off in cash savings, so presumably these are not yet known. Do they have a guaranteed minimum? Was the 58% bonus rate known at the time you started the plan?

true. and i respect that you are engaging in a reasoned discussion above that of some contributors. the point i was making is that i am not obligated to provide answers, let alone misinformation;), to anyone. the only thing i would ever do is provide people who request it with information which enables them to make their own decisions.

I think colsten makes a very good point in the post above - in the past it appears that this information is not being provided on the forum when requested. I too am interested in finding out more detail about these products so that I can evaluate exactly what is on offer. I have deliberately gone out in search of information and have come up lacking. I can see no reason why sharing this information on the forum would harm anyone if these products genuinely offer something of value.