Scottish Friendly Bond... cash in now or wait?

psychopathbabble

Don't get me started Euro

A couple who each earn £49k don't have to pay any back, but if one of you earns £50k + and the other was not working, you still have to pay it back on the sliding scale. I'm not saying we aren't in a fortunate position but I do think it should go on household NOT single income.

masonic

psychopathbabble wrote: »

I currently have a Scottish Friendly bond (yeah, I know, no judgement please). I pay in £25 per month and have so far paid £1875. It will end with my final payment in June 2020 and I will have paid in £3000.

After reading some feedback on the returns, I'm now not sure whether to leave it running or cash it in.

The current value is £2736.96 and the cash-in value today is £2029.33, meaning a 'profit' of £154.33 in my pocket now.

Any thoughts on whether it's worth keeping it running or cashing it in now?

If you've read my comments on the other thread, then it might surprise you that I'd lean towards keeping it. Essentially, the high charges are now a sunk cost - it you exit the plan early, they levy a high exit charge, equivalent to about 35% of the value of your investement. That makes it cheaper for you to see it through - providing of course you are happy with the investment choice.

I'm glad the other thread put this issue on your radar so that you can avoid such schemes in the future. Much better investment options exist for when you next want to dip your toe into the water.

psychopathbabble

Thanks Masonic.

I would be £150 odd up on what I've put in at the moment after all penalties. Will I be annoyed if I end up losing what I've put in or only make a few pennies on top? That's what concerns me. If I cash in now and sort our finances out, my budget says we could save £4K next year without pay rises, from May onwards.

masonic

psychopathbabble wrote: »

I would be £150 odd up on what I've put in at the moment after all penalties. Will I be annoyed if I end up losing what I've put in or only make a few pennies on top? That's what concerns me. If I cash in now and sort our finances out, my budget says we could save £4K next year without pay rises, from May onwards.

In a with-profits investment like this one, you will receive "bonuses" at the end of the year instead of investment returns. Once these have been added, they can't be taken away. Scottish Friendly's investment guide states "In severe market circumstances, such as a significant and prolonged fall in the stock market and/or interest rates, the regular bonus rate could fall to zero." So the worst case scenario is that you'd get back £2,737 your plan is currently worth, plus what you put in from here (about £1,100), minus around £125 of deductions = somewhere in the region of £3,700. It is very likely you'll do better than that.

psychopathbabble

masonic wrote: »

In a with-profits investment like this one, you will receive "bonuses" at the end of the year instead of investment returns. Once these have been added, they can't be taken away. Scottish Friendly's investment guide states "In severe market circumstances, such as a significant and prolonged fall in the stock market and/or interest rates, the regular bonus rate could fall to zero." So the worst case scenario is that you'd get back £2,737 your plan is currently worth, plus what you put in from here (about £1,100), minus around £125 of deductions = somewhere in the region of £3,700. It is very likely you'll do better than that.

Thank you for your response... It's all so confusing! Hmm, maybe I'll leave it... :cool: