Tax-Free Saving (not ISAs etc!) Advice

roadrunner131

Hello Money Geniuses (Geneii??) ...

I understand aside of all ISAs, PEPs, Tessas and whatnot, you're allowed save £25 tax free. I can't find any mention of this £25 allowance anywhere on the website, but I've been using it with Scottish Friendly for the last ten years through their Scottish Bond.

As that's just matured, I want to use that savings allowance again (every spare penny goes into paying off the mortgage, this is the only savings scheme I do apart from my company pension and keeping an old endowment chugging along) ... but should I buy another Scottish Bond, or is there a better place to invest the £25 a month, please?

Many thanks for your help!

Cook_County

OK - you saved £25 x 12 months x 10 years, so a total of £3,000. How much did they pay you back?

ManAtHome

Would your company match your contributions - could be a better idea if they would. The tax-free £25 a month is a "Friendly Society" thing - can work if you're a higher-rate taxpayer, but might not work as well on standard rate (and obviously a no-no if you don't pay tax).

How much did you get back over the 10 years - somebody clever will turn up and give you the annual percentage (may make it worthwhile to look at taxable regular savings accounts).

Aegis

ManAtHome wrote: »

Would your company match your contributions - could be a better idea if they would. The tax-free £25 a month is a "Friendly Society" thing - can work if you're a higher-rate taxpayer, but might not work as well on standard rate (and obviously a no-no if you don't pay tax).

How much did you get back over the 10 years - somebody clever will turn up and give you the annual percentage (may make it worthwhile to look at taxable regular savings accounts).

The annual percentage rate would be twice the Nth root of the total interest, where N is the number of completed years.

ManAtHome

Told yer... (I'm keeping the winning lottery numbers under wraps though...)

Aegis

ManAtHome wrote: »

Told yer... (I'm keeping the winning lottery numbers under wraps though...)

Of course, it would have helped if I'd dropped in the regular savings multiplier into that, since it's a drip-fed account. I believe that requires you to multiply the figure in my last post by 2 to approximate the AER over the term of the account.

I'll edit my post accordingly.

dunstonh

Friendly society 10 year plans typically have high charges which wipe out (plus more) any tax gain.

They should have been wiped out years ago as an option but seeing as most of the Friendly Societies that rely on this are Scottish, it was unlikely to happen.

roadrunner131

Er ... I got back £3,800 and summink ... I am a higher rate taxpayer ... not a chance of the company matching contributions ... was I robbed?!? Do I do it again? Decisions, decisions ...

dunstonh

roadrunner131 wrote: »

Er ... I got back £3,800 and summink ... I am a higher rate taxpayer ... not a chance of the company matching contributions ... was I robbed?!? Do I do it again? Decisions, decisions ...

You got an average of around 4.8%p.a. not good for a 10 year plan. Could have been worse but these plans are basically endowments with a bit of tax free. Unit trusts or investment trusts with low yields or no yields would be better for you and there would be very little tax difference on the amounts you are talking about despite one being called tax free.

ukdutypaid

Hasn't that given you 21% gross over the whole ten year, period. This against a mortgage rate of 6%+.....?

Or is it that my maths, isn't even worth commenting upon (more than possible, that last one)?....

Lokolo

I look at it like this.

Average in account is £1500. Gain is £600.

£600 of £1500 is 40%. Over 10 years is 4%. This isn't including compound interest however, which is not a lot when theres only £25 a month going in so I am going by the 4.8% by dun