Mutuals - Am I missing something?

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So my mum has decided to put £100 a month away into a mutual (Shepherds Friendly) for each of her 3 grandchildren into what looks like a tax exempt scheme savers scheme with some kind of health insurance thrown in... matures after 10 years or 18th birthday (whatever comes later).

I had a quick look and it looks like it is based on "bonuses" which are being smoothed over the life of the policy.

Typical returns look about 2-3% per annum....

When I looked at the charges (not discretely, but through an illustrated example of how charges impact policy values) they looked horrendous.

I have not seen any discussion of mutuals here on this board - are they generally considered a bad investment?

For what it's worth, I've suggested to mum that she gets a JISA opened up for each of them and pays into that instead... as I understand it, none of them have existing savings provision so no risk of breaches, and anyway at £100 a month, there's only 25% of the limit being used up.

So am I missing something obvious? Are mutuals a good long term investment? I struggle to find any info on the Shepherds website about what sort of returns the fund returned.

I think she is a mutual fan - she has a 25 year policy with National Friendly in her own name.
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  • Cardinal-Red
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    PS I am reading some of the other threads and may have answered my own question already!
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  • george4064
    george4064 Posts: 2,817 Forumite
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    PS I am reading some of the other threads and may have answered my own question already!

    Most people do that BEFORE starting their own thread...
    "If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes” Warren Buffett

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  • veryintrigued
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    A LV one has just matured for a relative.

    16 years at £15 a month - £2280 invested - £4800 received - very happy.
  • bowlhead99
    bowlhead99 Posts: 12,295 Forumite
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    edited 22 October 2016 at 5:05PM
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    There is one regular on these boards who's a fan of friendly society plans and the like, having used them for years (and presumably earned commissions for referring people to them). Most of the rest of us are usually keen to point out that they are largely obsolete - outmoded, inflexible and very high fee compared to modern competitors.

    One positive about that sort of plan is that assuming you are willing to lock the money away and not touch it to change to a better-value competitor over the (e.g.) 10 yr term, at least you won't lose money because the small bonuses, eroded by the large fees, can't be taken away from you. Whereas "real" funds offering proper access to modern stock market returns, can go down as well as up. If you are cautious but want a better return than cash and don't want to properly look into your lower-fee investment options, this could be ok.

    Another positive is you can put really small monthly contributions away. Although if you already have £100 a month, this doesn't seem something that's needed. If you only had £20 a month it might be the only game in town.

    Another positive is tax free nature of the holding. But again, doesn't seem something you need if the adult has spare S&S ISA allowance or the child has spare Jisa allowance.

    Most people would use a JISA or would use their own personal ISA allowance (or dividend allowance, cgt allowance etc) to avoid any tax.
  • Cardinal-Red
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    george4064 wrote: »
    Most people do that BEFORE starting their own thread...

    I'm not sure how true that is based on some of the threads that appear on these boards, but thanks. I'll do that next time.
    The above facts belong to everybody; the opinions belong to me; the distinction is yours to draw...
  • Cardinal-Red
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    bowlhead99 wrote: »
    Most people would use a JISA or would use their own personal USA (or dividend allowance, cgt allowance etc) to avoid any tax.

    Think I'm going to suggest she does this, I'll offer to do the adjustment as they approach 18 as well.... looks like "Lifestyle smoothing" takes place with the one she picked to reduce equity exposure as the policy approaches maturity.... a shift down the Vanguard LS scale should do it.

    Thanks all!
    The above facts belong to everybody; the opinions belong to me; the distinction is yours to draw...
  • xylophone
    xylophone Posts: 44,618 Forumite
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    edited 22 October 2016 at 4:17PM
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    https://shepherdsfriendly.blob.core.windows.net/pdf-media/young-saver-plan-key-features.pdf

    This?

    I notice that the SF TESP got a favourable mention here ( although four years ago).

    http://moneyforums.citywire.co.uk/yaf_postst1145_Tax-Exempt-Savings-Plans---are-they-worth-bothering-with.aspx
    For what it's worth, I've suggested to mum that she gets a JISA opened up for each of them and pays into that instead..

    You mean asks a parent to open one for each child (unless she is the legal guardian).

    https://www.gov.uk/junior-individual-savings-accounts/overview

    You have checked that none of the children have a CTF?
  • Cardinal-Red
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    bowlhead99 wrote: »
    There is one regular on these boards who's a fan of friendly society plans and the like, having used them for years (and presumably earned commissions for referring people to them). Most of the rest of us are usually keen to point out that they are largely obsolete - outmoded, inflexible and very high fee compared to modern competitors.

    Yes that thread was a fun read :beer:
    The above facts belong to everybody; the opinions belong to me; the distinction is yours to draw...
  • Cardinal-Red
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    xylophone wrote: »

    That's the one.
    xylophone wrote: »
    You mean asks a parent top open one for each child (unless she is the legal guardian).

    Yes, missed that point, but I don't see there being any objection from the parents. But I'll of course double check this.
    xylophone wrote: »
    You have checked that none of the children have a CTF?

    Didn't realise the importance of this but yes they are all under 3 so don't have the CTF issue... (waiting to be corrected on this point!)
    The above facts belong to everybody; the opinions belong to me; the distinction is yours to draw...
  • xylophone
    xylophone Posts: 44,618 Forumite
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    Didn't realise the importance of this but yes they are all under 3 so don't have the CTF issue... (waiting to be corrected on this point!)

    No correction - if they are all under three then the CTF would not have been available to them. The JISA was introduced in November 2011.
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