Police Mutual Regular Savings - Withdraw Early.

three1ne

Evening,

After some advice here.
My girlfriend has a Police Mutual Regular Savings account.

It's a 10 year plan (she's 14 months in). £100 deposit per month over 10 years. End up with £12,000 plus interest and a possible bonus.

We checked the projected return recently and, after 10 years, it currently stands at £12,179. Pointless.

We're setting up a Help to Buy ISA Gov 25% so ideally she would like to withdraw from Police Mutual to use the funds with this more financially beneficial scheme.

As stated on the website with Police Mutual you may not receive all of your money back when withdrawing early. She has £1400 invested with Police Mutual and in an email correspondence she is being told she will receive £893 back. She has asked how this figure has been calculated and has asked for T&C (as she doesn't have them) but as of yet Police Mutual's email replies haven't been very helpful and appear to be semi automated.

I am guessing that the figure is calculated on current interest rates although we are completely unaware whether there are additional charges, admin etc being added.

The projected interest rate after 10 years is currently so bad that it's almost a no brainer to withdraw and invest elsewhere, even when taking into consideration the initial loss.

Although as we are currently without a number of details I really am unsure on whether she should withdraw or even when would be best to withdraw.

Has anyone been in the same situation/know more than me?

She is currently waiting on a reply having asked, again, for the T&Cs

Any help would be greatly appreciated.

How are these accounts generally viewed?

dunstonh

We checked the projected return recently and, after 10 years, it currently stands at £12,179. Pointless.

Projections are just examples using a range of assumptions. Current assumptions are low. However, 10 year period for regular contributions into a plan type that is 20 years obsolete is never going to yield much.

I am guessing that the figure is calculated on current interest rates although we are completely unaware whether there are additional charges, admin etc being added.

Nothing to do with interest rates. It will be a defined deduction that will decrease over time.

The projected interest rate after 10 years is currently so bad that it's almost a no brainer to withdraw and invest elsewhere, even when taking into consideration the initial loss.

Again, its not interest and its not a forecast. Its just a projection using assumptions. Even the best returning investment on the planet would have to use the same projections assumptions.

How are these accounts generally viewed?

They went obsolete around the mid 90s. They hang on in the direct marketing. Often sold via Unions (who get commission), infinity groups (who get commission) or direct marketing in papers. Advisers dont go near them as they can get treated as mis-sales under advice (given how poor they are compared to modern options). However, direct marketing doesnt have to worry about that.

This particular plan has a set up charge of £105
A yearly charge of £9
a charge of £4.50 at the end
a 0.5% p.a. extra charge for the guaranteed element of the fund
An annual fund charge on top (not disclosed given its nature - its old style conventional with profits)

The published reduction in yield over 10 years is 2.1% p.a. (based on a 30 year old paying £5 per week for 10 years)

On surrender you will pay a 5% penalty. Will get the underlying value of the investments, not the protected value (so that will be quite a bit lower as markets are currently lower) and you pay the exit charge. So, the figure of £893 on £1400 paid in sounds about right.

An awful plan that should never have been taken out from the start.

PeacefulWaters

You're probably right to see Help to Buy cash ISA as a better alternative for £100 a month. And I suppose the 25% top up from George will replace most of the capital loss if you surrender. So that's what I would do.

Does the Police Mutual plan have a "paid up" option? That way you pay no more contributions but retain the existing investments to maturity.

Borderline if it provides value compared to HTB ISA but worth finding out.

three1ne

Thank you, both replies have been really helpful.