Tax Exempt Savings Plans [TESPs]

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  • edited 25 June 2013 at 8:15PM
    dunstonhdunstonh Forumite
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    edited 25 June 2013 at 8:15PM
    Ok. lets look at a real example to show you just had bad they are: Take a look at this one. Its by no means the worst. So, I am not picking on bad. Just happened to be a name mentioned on another thread.

    http://www.teachersassurance.co.uk/sites/default/files/documents/Key-Features-of-the-Tax-Free-Savings-Plan.pdf

    Look at page 5 and you have examples of what you could get back in years 1 to 5 and year 10. It uses a gross return (before charges of 6.25%. By year 5 if it makes 6.25% a year it will be worth £100 less than you paid in. At year 10, it would pay out £3430 after you have paid in £3000. So, on a gross return of 6.25%, you only get 2.7% average because all the charges average out at an equivalent of 3.55% p.a.

    Putting that another way, the fund has to grow on average by 6.25% p.a. to pay out 2.7% p.a. to the investor.

    That actually leads nicely into another warning we as IFAs were given last year over charges where it was felt charges upto 2% p.a. wouldnt raise eyebrows. Charges of around 2% to 2.5%p.a. could be justified but would need the fund to offer enough potential to make it justified (Jup merlin income portfolio perhaps a good example of a fund that has high charges but can be justified very easily). Charges over 3% would possibly be considered mis-sale and should be avoided. This plan has charges that equate to 3.55% p.a. over 10 years.
    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.
  • planteriaplanteria Forumite
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    jem16 wrote: »
    If this misinformation is what people base their decisions on, then yes it is not only unethical but is very wrong.

    Do you think any of the information that Friendly Societies are making available, including via Introducers/Agents, is incorrect? Saying something is 'wrong', even with conviction, and even doing so many times, doesn't actually make it so.
  • planteriaplanteria Forumite
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    will have a look later tonight dunstonh..
  • jimjamesjimjames Forumite
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    planteria wrote: »
    Do you think any of the information that Friendly Societies are making available, including via Introducers/Agents, is incorrect? Saying something is 'wrong', even with conviction, and even doing so many times, doesn't actually make it so.

    Is misleading information or leaving out information wrong? Is it acceptable to quote selective information that doesn't apply to 90% of the people who a product is aimed at?

    If I said "buy these tomatoes from me because you don't have to pay VAT on them" but didn't say that no tomatoes attract VAT, would that be wrong?

    I deal with companies using misinformation all the time, it is what they don't say that is as much of the problem as what they do say.

    Telling someone that a product is tax free when that is irrelevant to the buyer is misleading in my view - unless they flag up that tax benefit depends entirely on circumstances which I've not seen on any of the TESP leaflets. As you would expect from marketing material all the gloss is on the supposed benefits with no warning of the potential downsides.
    Remember the saying: if it looks too good to be true it almost certainly is.
  • dunstonhdunstonh Forumite
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    Do you think any of the information that Friendly Societies are making available, including via Introducers/Agents, is incorrect?

    Using unqualified and unregulated individuals to sell a product in a highly regulated area is unethical. It may be allowed but it doesnt make it desirable or "right". Banks sold PPI for 20 years they way they did and it was allowed.
    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.
  • jem16jem16 Forumite
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    planteria wrote: »
    Do you think any of the information that Friendly Societies are making available, including via Introducers/Agents, is incorrect? Saying something is 'wrong', even with conviction, and even doing so many times, doesn't actually make it so.

    Does the information make it clear that the only people who might gain from having one of these plans is the higher rate taxpayer who has used up all of his/her tax free allowances elsewhere? For everyone else there is no tax free gain as the dividend tax cannot be reclaimed anyway and the CGT is never going to be an issue with the amounts involved.

    As to Introducers who don't know the product themselves, how can it be correct for them to "sell" this product? What literature/information do you give to people to gain your £25/£50? Do you give all the warnings that a properly regulated adviser would give? How do you think the Friendly Society recoups the money they pay to you for signing up another poor soul?

    The majority of these products offer incentives to people who sign up. If the product was in any way good or useful there would be no need for incentives. The high charges for this product means that you could have bought yourself loads of these "free " incentives and still saved money.
  • planteriaplanteria Forumite
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    if any of you think any information that FSs make available should be reported to the authorities, maybe you should

    jem: i don't "sell" any products for any financial institution. i haven't studied the matter, but I suspect that "The majority of these products offer incentives to people who sign up." is not the case.

    and i Will go through that re. Teachers, dunstonh:coffee:
  • planteriaplanteria Forumite
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    you keep telling me what i would earn, regardless of my corrections :laugh:

    i can pass on details of products for two Friendly Societies and people can read them and decide whether to become members of those Friendly Societies. that is how it is. whether you have an issue with it or not, i am afraid that remains how it is. anyway,........

    i am interested in the idea that With-Profits Funds are run in a way that might be too cautious, and thereby reduce the potential for good returns. Kingston Unity and Sheffield Mutual both have Investec managing the equity portions of their portfolios, but perhaps they are doing so very cautiously, perhaps too cautiously.

    i haven't studied the Sheffield Mutual property portfolio, but Kingston Unity have a good portfolio, in my opinion, which seems to be well managed. They have focused upon the 'honey pot' Yorkshire Cities/Towns of York, Harrogate and Beverley and focused on prime, central areas. These areas have been relatively resilient to downturns elsewhere. at the AGM we were able to quiz the managers and i thought they responded very well.
  • jimjamesjimjames Forumite
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    innovate wrote: »

    -- whatever. Can you please answer the question why your TESPs referral offer is better for people than cash ISAs, S&S ISAs, SIPPs? I did ask you this question before and you chose the ignore it. Why would anyone who has maxed their S&S ISA and SIPP want to put money into a TESP? Why would anyone who has not maxed their S&S ISAs/SIPP want to divert any money into a TESP?

    Whilst you keep punting TESPs referrals (directly or indirectly), I will keep asking until you provide answers I can understand

    I'm still waiting for this answer too.

    My assumption is that TESPs are aimed at low income earners. If you can afford £11k in an ISA why would you bother with another £300 in a TESP per year when it lacks all the flexibility and cost benefits of the ISA. If it was another £11k tax free I could understand why you might tolerate those disadvantages.

    If I'm wrong and they are aimed at another target group then I'd be interested for planteria to enlighten us but when the average income in the UK is around £26k the number of people who can afford to max an ISA is certainly not someone average.
    Remember the saying: if it looks too good to be true it almost certainly is.
  • planteriaplanteria Forumite
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    innovate wrote: »
    Whilst you keep punting TESPs referrals

    :laugh: i don't. you keep telling everyone that i have offered them previously, and drawing attention to it.
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