are friendly societies worth considering?

caronoel

Mrs Caronoel and I have maxed out on ISAs and pensions, and are looking for somewhere new to invest.

I was considering one of the friendly society tax efficient products. Are any of te any good?

masonic

There's some discussion in this thread (the thread is in relation to an ISA product, but their tax exempt special savings plans are even worse!) The short answer is no, they are not any good.

With the new dividend allowance, you can earn £5,000 in dividends tax free, which is enough for most people. That leaves only capital gains tax, for which you have an annual allowance of £11,100, which, with some forward planning, you can utilise as needed to keep yourself below the level at which you would face a CGT bill.

dunstonh

If you are referring to the old fashioned £25pm friendly society plan then the answer is nearly always no. Whilst it is a tax free amount, it is a bit of a red herring as the alterantives provide greater tax free opportunities whilst still at much lower cost.

The big problem with the friendly society plans is they are charged as if they were still priced in the 1980s. They also tend to use (but not always now) old fashioned investments.

Normally after ISA, you would look to use a general investment account or investment bond. Investment bond has become increasingly niche and is probably 3rd in the pecking order now (bar some trust requirement) as you can earn £5000 a year in dividends tax free and £11.1k capital gains tax free. So, the GIA tends to come directly after ISA.

planteria

i invest with friendly societies alongside investing in ISAs and Pensions. the products that appeal most to me are those than enable you to invest over time and earn a return on funds not yet invested. they are generally very conservatively managed and so can sit well alongside other investments. we've got plans for the whole family.

darren72

planteria wrote: »

i invest with friendly societies alongside investing in ISAs and Pensions. the products that appeal most to me are those than enable you to invest over time and earn a return on funds not yet invested. they are generally very conservatively managed and so can sit well alongside other investments. we've got plans for the whole family.

Do you mind saying which ones you invest with ?

Thanks

jimjames

caronoel wrote: »

Mrs Caronoel and I have maxed out on ISAs and pensions, and are looking for somewhere new to invest.

I was considering one of the friendly society tax efficient products. Are any of te any good?

My view is that no, they aren't any good. The charges are high, they are inflexible and the tax benefits are irrelevant for most people.

if you've maxed out ISAs & pension (£15,000 ISA pa, £40,000 pensions pa per person so total of £110k pa contributions between you?) then £25 per month doesn't really seem like an amount worth bothering with especially when there are so much better options available. Have you really exceeded £110k pa contributions or did you mean something else?

dunstonh

darren72 wrote: »

Do you mind saying which ones you invest with ?

Thanks

I would put money on it being pretty much all them. Planteria likes friendly societies.

darren72

dunstonh wrote: »

Normally after ISA, you would look to use a general investment account or investment bond. Investment bond has become increasingly niche and is probably 3rd in the pecking order now (bar some trust requirement) as you can earn £5000 a year in dividends tax free and £11.1k capital gains tax free. So, the GIA tends to come directly after ISA.

I've never heard of a General Investments Account or Investment Bond before - How are these purchased ? - In the same way as funds ?

Thanks

mgv

darren72 wrote: »

I've never heard of a General Investment Account or Investment Bond before - How are these purchased ? - In the same way as funds ?

I would suppose a General Investments Account is a name for a regular, taxable account (i.e. not an ISA, SIPP or any other special account). No idea about investment bonds.

planteria

dunstonh wrote: »

I would put money on it being pretty much all them. Planteria likes friendly societies.

i think LV is a Friendly Society, so i would be a member of 4.. so you owe me that money dunston;)

dunstonh

planteria wrote: »

i think LV is a Friendly Society, so i would be a member of 4.. so you owe me that money dunston;)

Sorry. No windfall shares this time.

I've never heard of a General Investments Account or Investment Bond before - How are these purchased ? - In the same way as funds ?

Investment bonds are a tax wrapper. More popular in the past. More niche now. Still some scenarios where it is suitable (higher rate payers who use their £5k div allowance, those that use their CGT allowance, those using trusts).

General Investment account is the generic name for an unwrapped investment account holding investments.

Pensions, ISAs, Onshore/offshore investment bonds, GIA etc can all hold the same investments. They just handle tax differently.