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Regular Savings Plans
planteria
Posts: 5,321 Forumite
alongside ISA and Pension investments i have some investments with mutuals. as discussed in another thread, i am investing small amounts into Tax Exempt Savings Plans (TESPs) with Friendly Societies.
one of the features of TESPs that i have drawn attention to is their policy of stating a Sum Assured, which is based around the value that a member will pay into a plan over the period that contributions will be made, and paying bonuses on the Sum Assured, rather than the contributions to date. so, for example, a TESP i have agreed to pay into with Sheffield Mutual will have £600 paid into it [£5/m for 10years] had a Sum Assured from the outset of £617. Annual Bonuses are applied to the Sum Assured for each calendar year and when they are applied they increase the Sum Assured, upon which future bonuses will be calculated. Payments into TESPs are limited to £25/month.
however, another TESP i have is with Kingston Unity. along with details of my TESP they have sent me some literature re. Regular Savings Plans. These are not limited to £25/month. I am therefore wondering about the potential of using a RSP for a more substantial investment...
if, for example, someone committed to invest £250/m, a useful sum could be generated over a term. over a 10 year plan, this would be investing £30,000. depending on circumstances, this could be considered a large commitment. and performance of the underlying fund would, of course, be very important.
the point that interests me is that, despite some suggestions to the contrary in another thread, the bonuses on RSPs with Kingston Unity are calculated similarly to those on their TESPs. ie. from the first year of the 10 years, the bonuses would be applied to the £30,000+ Sum Assured. So, the bonuses could be quite substantial compared to the amount invested. If the policy term was extended, then this would become even more significant, but, of course, the commitment would be similarly increased.
one of the features of TESPs that i have drawn attention to is their policy of stating a Sum Assured, which is based around the value that a member will pay into a plan over the period that contributions will be made, and paying bonuses on the Sum Assured, rather than the contributions to date. so, for example, a TESP i have agreed to pay into with Sheffield Mutual will have £600 paid into it [£5/m for 10years] had a Sum Assured from the outset of £617. Annual Bonuses are applied to the Sum Assured for each calendar year and when they are applied they increase the Sum Assured, upon which future bonuses will be calculated. Payments into TESPs are limited to £25/month.
however, another TESP i have is with Kingston Unity. along with details of my TESP they have sent me some literature re. Regular Savings Plans. These are not limited to £25/month. I am therefore wondering about the potential of using a RSP for a more substantial investment...
if, for example, someone committed to invest £250/m, a useful sum could be generated over a term. over a 10 year plan, this would be investing £30,000. depending on circumstances, this could be considered a large commitment. and performance of the underlying fund would, of course, be very important.
the point that interests me is that, despite some suggestions to the contrary in another thread, the bonuses on RSPs with Kingston Unity are calculated similarly to those on their TESPs. ie. from the first year of the 10 years, the bonuses would be applied to the £30,000+ Sum Assured. So, the bonuses could be quite substantial compared to the amount invested. If the policy term was extended, then this would become even more significant, but, of course, the commitment would be similarly increased.
"The Society’s Board, in conjunction with the Actuary,
will review the performance of the With-Profits fund
at the end of each year and decide how much of any
profits generated can be allocated after the liabilities
have been covered.
Any such allocation is paid in the form of an annual
bonus which is declared generally in April each year.
It is calculated on the Sum Assured not on the
premiums paid during the year. You will receive a
bonus statement each year advising of the amount
of new bonus and current policy value assuming it
runs to the anticipated maturity date.
Once annual bonuses have been added to the plan
they cannot be taken away assuming the plan runs
to maturity. Therefore at maturity or earlier death you
will be paid the guaranteed Sum Assured plus any
bonuses. Note that there is no guarantee that an
annual bonus will be declared, although historically
the Society has never failed to do so.
There may also be a terminal bonus on maturity, but
this is not guaranteed and will depend on investment
performance over the life of the plan."
will review the performance of the With-Profits fund
at the end of each year and decide how much of any
profits generated can be allocated after the liabilities
have been covered.
Any such allocation is paid in the form of an annual
bonus which is declared generally in April each year.
It is calculated on the Sum Assured not on the
premiums paid during the year. You will receive a
bonus statement each year advising of the amount
of new bonus and current policy value assuming it
runs to the anticipated maturity date.
Once annual bonuses have been added to the plan
they cannot be taken away assuming the plan runs
to maturity. Therefore at maturity or earlier death you
will be paid the guaranteed Sum Assured plus any
bonuses. Note that there is no guarantee that an
annual bonus will be declared, although historically
the Society has never failed to do so.
There may also be a terminal bonus on maturity, but
this is not guaranteed and will depend on investment
performance over the life of the plan."
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Comments
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Some of the Friendly Societies do W/P (S&S) ISAs. Are the tax advantages worth having, I wonder?Free the dunston one next time too.0
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i have been using HL for my ISA allowance, chasing performance--in effect.
the WP funds are a lot more 'steady', but the concept of bonuses being added to Sum Assured which is calculated based upon payments that you haven't even made yet is interesting to me.
are there any other examples of this?0 -
Some of the Friendly Societies do W/P (S&S) ISAs. Are the tax advantages worth having, I wonder?
A poor investment is still a poor investment regardless of the wrapper that is put round it.
I really can't see the point in these. Why would anyone bother when an ISA is far more flexible, lower cost and better performance and allows over £11k per year to be added. I'd imagine the number that can exceed that investment limit to be fairly small when the average wage is around £27k.Remember the saying: if it looks too good to be true it almost certainly is.0 -
kidmugsy is asking about ISAs though, jimjames. the question there is whether allocating the year's ISA allowance to a Friendly Society With-Profits fund is a good idea.
an ISA in Trusts/Shares seems a good idea to me. but, potentially, with a RSP alongside, as something solid & consistent, that generates bonuses on money not yet invested. what do you think?0 -
Hi planteria, I feel that a regular £250 pm is quite a lot in one pot. As you point out this amounts to £30,000 over 10 years. Have you fed it through to KUFS to get a proposal?. Suggest you also ask about their payment history relating to Final Bonus. I note that although KUFS have never failed to make yearly bonus payment there is a big difference between a theoretical 4% rate and perhaps a low 0.5%.
I am comfortable with my TESPs but £250 pm in their RSP is a big commitment to make for 10+ years. They state 'Once annual bonuses have been added to the plan they cannot be taken away assuming the plan runs to maturity'. The key word is maturity.0 -
I have a few savings plans, with friendly societies, and have done very well with them. The best was Sons of temperance which closed down. I think I received something like 16 times back from what I had paid in.
I have a policy with Druids Sheffield which had the annual bonuses guaranteed from the outset and had a compound return of 8%. I also get a cheque for £40 a year from them towards optical and dental benefits.
I have a couple of policies with others such as National Deposit and Kingston Unity which are both doing ok.
By far the best is my plan with Forresters FS. I pay £10 a month and while their annual bonuses are not great I get a £50 winter fuel allowance and 50% refund on my dental and optical bills! They also pay out regular cheques from my local branch when the have a surplus!
I think they are easily overlooked and while some see with-profits as an outdated option I have made some considerable profits through the FS movement.0 -
longleggedhair wrote: »By far the best is my plan with Forresters FS. I pay £10 a month and while their annual bonuses are not great I get a £50 winter fuel allowance and 50% refund on my dental and optical bills! They also pay out regular cheques from my local branch when the have a surplus!
I think they are easily overlooked and while some see with-profits as an outdated option I have made some considerable profits through the FS movement.
Friendly Societies form part of my overall portfolio too .. some FS are better than others. The overall number of remaining FS has fallen and will continue as more cost is involved in regulation.
With regard to Foresters FS the area that one lives will determine the benefits that can be received. The smaller the number of members in a Branch or Court has the biggest influence on any surplus available for benefits. I have never come across any mention of a £50 winter fuel allowance. Are you able to give more detail?.0 -
patientperson wrote: »Friendly Societies form part of my overall portfolio too .. some FS are better than others. The overall number of remaining FS has fallen and will continue as more cost is involved in regulation.
With regard to Foresters FS the area that one lives will determine the benefits that can be received. The smaller the number of members in a Branch or Court has the biggest influence on any surplus available for benefits. I have never come across any mention of a £50 winter fuel allowance. Are you able to give more detail?.
Yes both me and my mom are members in two different branches in the West Midlands. She gets a £30 fuel allowance which is only paid to members of the branch over 60. My branch pays £50 to everyone regardless of age. This alone pays almost half of the premiums of my policy! That's before I receive any optical or dental benefits which I received about £200 from last year, so for saving £120 with them last I got back over £250. Even if my policy breaks even on maturity I will be quids in!
I also received £250 a year off them when I was at uni a few years back. Its a no brainer really, I don't really understand how they can possibly afford to do this though. Any thoughts?0 -
longleggedhair wrote: »Yes both me and my mom are members in two different branches in the West Midlands. She gets a £30 fuel allowance which is only paid to members of the branch over 60. My branch pays £50 to everyone regardless of age. This alone pays almost half of the premiums of my policy! That's before I receive any optical or dental benefits which I received about £200 from last year, so for saving £120 with them last I got back over £250. Even if my policy breaks even on maturity I will be quids in!
I also received £250 a year off them when I was at uni a few years back. Its a no brainer really, I don't really understand how they can possibly afford to do this though. Any thoughts?
longleggedhair .. Your membership has done you proud and I hope it will continue to do so. Before other members of this forum jump onto the bandwagon it is very important to know that although Foresters Friendly Society is open to all .. it is only the West Midlands (Wolverhampton/Willenhall) courts/branches which are flush with funds and so are able to be so generous regarding dental/optical and winter fuel allowances. I understand that their increase in funds is down to the sale of property to a local housing association and then also not having to maintain the properties anymore. The set £50 for winter fuel may not last long as such fixed payments will attract the attention of HMRC. Time will tell.
Other courts around the country will be struggling with any payments exceeding £50 dental/optical. Some will be a lot less and more like a maximum of £25.This is all to do with the available funds of the courts .. they are not shared out UK wise.0 -
Do you savings plans fans really truly all believe you get money for nothing, and that you couldn't have got a lot better elsewhere?0
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