Scottish Friendly 'MyMoneybuilder Select' [ISA] - Cashback

[Deleted User]

Can somebody look at this before I sign up to it please?  

There is a 24hr MyTopCashback promotion on Scottish Friendlies MyMoneybuilderSelect ISA.

£250 cashback value - 'Invest £75 a month in a My MoneyBuilder Select (ISA) with Scottish Friendly. Capital at risk.'

It looks pretty good, I invest in stocks and have a moderate risk tolerance. (this one is low-risk) I feel £75 a month is no big ask of me. 
Also, if you do not make a withdrawal in 10 years, they give you a 100% bonus. 

"With My MoneyBuilder Select (ISA) you get a guaranteed minimum cash sum if you cash in on the 10th anniversary of the start date of your investment, or every 5 years after this date. So this includes you 15th anniversary, 20th anniversary, 25th anniversary and so on.

The cash sum will be 100% of the payments you`ve made provided you haven’t withdrawn any of the money in your My MoneyBuilder Select policy or switched out of the Unitised With-Profits fund."

Am I missing something? 

I understand this as £75 * 120 months = £9000. So after 10 years you will have:      £9000 (+ or - stock market change) + £9000?

Then every 5 years after this you will get another £9000+ assuming you continue paying?

grumiofoundation

I am pretty sure that after 10 years they are not guaranteeing 100% profit over that time, they are guaranteeing you will get back what you put in (which obviously over 10 years would equate to a pretty big loss vs inflation or other savings/investment methods).

The products offered by friendly societies have a number of issues (I am sure someone more knowledgable will be able to go into more detail). Generally high fees and poor returns (hence the very generous cashback). There can be heavy penalties if you need to access the money early (See threads below on the MVR issue, albeit with shepherds friendly).

You can invest for the minimum return required for the cashback and then withdraw ASAP and make some 'easy' money, staying invested past this is likely to not be worth it - however make sure you read the Ts and Cs incredibly carefully and beware of the goalposts moving (e. g. MVR). 

https://forums.moneysavingexpert.com/discussion/6152517/stocks-and-shares-isa#latest

https://forums.moneysavingexpert.com/discussion/comment/77030997#Comment_77030997

bowlhead99

Yes, it sounds like you are missing something. You are thinking they give you a 100% bonus on your contributions in ten years (which would equate to 7% annualised return if you were putting money in now and getting it back with 100% gain in ten years, but would really be massively more than that because most of the money is not put in all at once, but drip-fed so that some of it has only been invested a few months).  So that is a monster annualised return and massively unrealistic. It's not what they mean.

When you read what you copy-pasted, it is not saying that at all. It sounds like all that is happening is that their with-profits fund gives you a capital guarantee that if you cash in on the ten year anniversary (and certain later anniversaries), that the amount you cash in will not be subject to a market value reduction for what the fund's assets are actually worth. You will be able to get a guaranteed cash sum equating to your contributions, even if the markets are crashing through the floor at that point. 

If you are a cautious investor, you might like the idea of such a capital guarantee. But remember that some of the money you have invested will have been in the product for ten years at that point (and some 9, and some 8 etc) and on average your money has been in there for about 5 years, so to get it back with no interest or dividend or gain to compensate you for inflation and the time value of money, is not a great level of return.

In a 'with profits' fund, basically the money is invested and you get a 'bonus' each year added to your capital, which is done in a smoothed way so that the capital value doesn't fluctuate up and down as much as it would in a directly market-linked open-ended fund. The capital builds up, but if you cash out and it's not at your agreed 10-year anniversary, it can be subject to a market value reduction to make sure that the investors who remain in the product are not disadvantaged by you deliberately taking money away from the fund in bad markets, where they have to cash-in the underlying assets to get their hands on enough money to pay you out. So although it looked like the value was building up cautiously through good times and bad, you might not actually get that when you cash out. They agree that there will be certain anniversaries where there is no market value reduction, so you can pay in for ten years and then exit without a surprise negative shock.


£250 is not a bad little bit of cashback if you are only a small investor. However, £75 a month is only £900 a year and I expect in a few years time you will have more spare income and want to be investing more than that; but if you are still using this product for £75pm you won't be able to use another provider's S&S ISA instead, because you can only contribute to one S&S ISA in any one tax year...

Albermarle

After 10 years you will have £9000 , the  after another 5 years you will have £13,500 as a minimum payout.
I think the issue with these friendly society with profits investments is that their performance tends to be poor .So although you have the opportunity to get back what you have paid in ( as a kind of backstop) the growth of the fund over 10 years will have been poor compared to the market growth . In any case £9000 minus 10 years inflation is not really £9000 in value anymore . Probably more like £6,500 
I did not see anything on their website about a 100% bonus ?

[Deleted User]

Albermarle said:

After 10 years you will have £9000 , the  after another 5 years you will have £13,500 as a minimum payout.
I think the issue with these friendly society with profits investments is that their performance tends to be poor .So although you have the opportunity to get back what you have paid in ( as a kind of backstop) the growth of the fund over 10 years will have been poor compared to the market growth . In any case £9000 minus 10 years inflation is not really £9000 in value anymore . Probably more like £6,500 
I did not see anything on their website about a 100% bonus ?

bowlhead99 said:

Yes, it sounds like you are missing something. You are thinking they give you a 100% bonus on your contributions in ten years (which would equate to 7% annualised return if you were putting money in now and getting it back with 100% gain in ten years, but would really be massively more than that because most of the money is not put in all at once, but drip-fed so that some of it has only been invested a few months).  So that is a monster annualised return and massively unrealistic. It's not what they mean.

When you read what you copy-pasted, it is not saying that at all. It sounds like all that is happening is that their with-profits fund gives you a capital guarantee that if you cash in on the ten year anniversary (and certain later anniversaries), that the amount you cash in will not be subject to a market value reduction for what the fund's assets are actually worth. You will be able to get a guaranteed cash sum equating to your contributions, even if the markets are crashing through the floor at that point. 

If you are a cautious investor, you might like the idea of such a capital guarantee. But remember that some of the money you have invested will have been in the product for ten years at that point (and some 9, and some 8 etc) and on average your money has been in there for about 5 years, so to get it back with no interest or dividend or gain to compensate you for inflation and the time value of money, is not a great level of return.

In a 'with profits' fund, basically the money is invested and you get a 'bonus' each year added to your capital, which is done in a smoothed way so that the capital value doesn't fluctuate up and down as much as it would in a directly market-linked open-ended fund. The capital builds up, but if you cash out and it's not at your agreed 10-year anniversary, it can be subject to a market value reduction to make sure that the investors who remain in the product are not disadvantaged by you deliberately taking money away from the fund in bad markets, where they have to cash-in the underlying assets to get their hands on enough money to pay you out. So although it looked like the value was building up cautiously through good times and bad, you might not actually get that when you cash out. They agree that there will be certain anniversaries where there is no market value reduction, so you can pay in for ten years and then exit without a surprise negative shock.


£250 is not a bad little bit of cashback if you are only a small investor. However, £75 a month is only £900 a year and I expect in a few years time you will have more spare income and want to be investing more than that; but if you are still using this product for £75pm you won't be able to use another provider's S&S ISA instead, because you can only contribute to one S&S ISA in any one tax year...

grumiofoundation said:

I am pretty sure that after 10 years they are not guaranteeing 100% profit over that time, they are guaranteeing you will get back what you put in (which obviously over 10 years would equate to a pretty big loss vs inflation or other savings/investment methods).

The products offered by friendly societies have a number of issues (I am sure someone more knowledgable will be able to go into more detail). Generally high fees and poor returns (hence the very generous cashback). There can be heavy penalties if you need to access the money early (See threads below on the MVR issue, albeit with shepherds friendly).

You can invest for the minimum return required for the cashback and then withdraw ASAP and make some 'easy' money, staying invested past this is likely to not be worth it - however make sure you read the Ts and Cs incredibly carefully and beware of the goalposts moving (e. g. MVR). 

https://forums.moneysavingexpert.com/discussion/6152517/stocks-and-shares-isa#latest

https://forums.moneysavingexpert.com/discussion/comment/77030997#Comment_77030997

Thanks for the replies. I am referring to this account specifically: https://www.scottishfriendly.co.uk/affiliate/my-moneybuilder-select-isa?afid=aw&utm_source=topcashback&utm_medium=affiliates&utm_campaign=

bowlhead99

Deleted_User said:

Thanks for the replies. I am referring to this account specifically: https://www.scottishfriendly.co.uk/affiliate/my-moneybuilder-select-isa?afid=aw&utm_source=topcashback&utm_medium=affiliates&utm_campaign=

Yes, it works how we have explained it. 
As they say at the top of the page, it gives you "a guarantee on your 10 year anniversary as well as growth potential, as long as you don't make any withdrawals or switch out of the fund."

The guarantee is that you will get 100% of your contributions back on your 10 year anniversary and there is growth potential on top, but the growth might be low or nil, it depends what happens to markets. 

There is no "100% bonus".

The product has a "single fund choice with a guaranteed minimum cash lump sum on your 10 year anniversary of investing".  That minimum amount you get back on the anniversary is the same amount of money you gave them in the first place. It is not the money you gave them plus the same amount again on top. The amount you get on top, might be £0, because there is only 'growth potential', not 'guaranteed 100% growth', and they do not indicate anywhere that the amount you get on top would be anything like as much as 100% in ten years of drip-feeding.

verybigchris

Their "limited time" cashback offers are like DFS sales. They've been running them for ages and ages, starting a new one as soon as the last one finishes. I think it's an immoral, unethical and downright misleading strategy that tries to trick people into rushing into an investment decision, and it tells you everything you need to know about the type of company they are.

Ed-1

If you cash in before the end of 5 years there will be a £50 deduction from your cash-in value.

Also in my experience Scottish Friendly deduct VAT from the headline cashback figure so you don't get the full amount.

dunstonh

The reason these plans have cash backs is that they are so expensive.  They are effectively giving some of the money you pay in charges back to you.         It is not free money.

verybigchris

I've just gone through my deleted emails folder to see some of their other "limited" cashback deals:

• 21st Dec: £120
• 2nd Jan: £305
  
• 7th Jan: £305
• 21st Jan: £305
• 29th Jan: £150
• 2nd Feb: £305
• 27th Feb: £305
  
• 16th Apr: £160