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With profits endowments

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What’s everyone’s thoughts on with profits endowments?

I’ve just had a 10 year tax-exempt plan with Sheffield Mutual Friendly Society which has returned around £3,700 for a £25 per month contribution over 10 years which I’m pretty happy with.

These plans are an extra allowance to the £20,000 ISA allowance and my current provider appear to be the top performer in the friendly society market. Thoughts?

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  • dunstonh
    dunstonh Posts: 119,617 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    What’s everyone’s thoughts on with profits endowments?

    Died a death by mid 90s. Only stragglers after that with the last mainstream provider pulling out in 2004.
    I’ve just had a 10 year tax-exempt plan with Sheffield Mutual Friendly Society which has returned around £3,700 for a £25 per month contribution over 10 years which I’m pretty happy with.

    You are not referring to an endowment but a friendly society savings plan.

    The return is not great for the 10 year period in question. a little over 4%. Looking at ISAs from that period using full commission funds (not the class available today but the class used back then) and a likely recommendation at that time, say Fidelity Spec Sits, which was the top-selling fund in that period, you would have ended up with £4694. (avoiding any retrospective picking).
    These plans are an extra allowance to the £20,000 ISA allowance and my current provider appear to be the top performer in the friendly society market. Thoughts?

    The tax free bit is a red herring.

    For example, after the ISA allowance is used, you have £2000 a year dividend allowance and over £11k annual CGT allowance. For most employed people or self employed people, that means they can hold around £100,000 unwrapped and not suffer a tax liability. Only company directors have to be careful there.

    These friendly society plans are usually damned expensive and use old fashioned, largely obsolete investment funds and should have went out of date around the mid 90s. Indeed, IFAs were warned years ago to be careful recommending them as they could be considered missold. This is why you usually only see them offered direct to consumer.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
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