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Investment Bond

Invest a lump sum in an Investment Bond that aims to offer long-term growth over 5 years or more.

Investment Bond

Frequently Asked Questions

Want to know more about our Investment Bond? Take a look at the most commonly asked questions below to find out more about this long-term investment. If you have any questions that are not answered here, please contact us.

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About the Investment Bond

What is an Investment Bond?

Our Investment Bond is a single lump sum investment designed to provide potential growth over the medium to long-term. 

Who can take out a Foresters Friendly Society Investment Bond?

Providing you are aged between 18 and 80 and a UK resident for tax purposes you can take out a Foresters Friendly Society Investment Bond. The Bond should be viewed as a medium to long-term investment of at least 5 years or more.

You can take out the Foresters Friendly Society Investment Bond in single or joint names. If the policy is taken on a joint names basis both policyholders are automatically treated as holding equal shares in the value of the Investment Bond. If one owner dies, the other automatically becomes the sole owner of the whole Bond.

The annual statement and other correspondence will be sent to the first named policyholder. If you would like to make any changes to your Investment Bond, the signature of the policyholder or, in the case of joint life policies both the policyholders, will be required.

What happens if I/We cash-in the Investment Bond?

You can cash-in your Investment Bond whenever you want. The cash-in value of your Bond will depend upon the amount you have invested, the investment returns that have been achieved and our costs. In favourable investment conditions we may also add a final bonus to the Bond's value which would increase the overall return you receive.

Conversely, in adverse investment conditions we may apply a Market Value Reduction (MVR) which would reduce the plan's value.

What is a Market Value Reduction (MVR)?

This is a deduction we may make when you fully or partially withdraw your Investment Bond. Its purpose is to be fair to policyholders leaving the Order Insurance Fund and those staying by ensuring that the cash-in value is not unfairly higher than the market value of the plan's assets and that a fair share is left for the remaining policyholders. This adjustment could have the effect of reducing the value of your Bond at that time and in some circumstances could mean that you get back less than you have paid in. We will never apply an MVR on the death of the single policyholder or the death of the second policyholder for joint life policies.

We have not applied an MVR to date on the Foresters Friendly Society Investment Bond, however this could be applied in the future.

Are there any charges?

There is an Annual Management Charge which is initially set at 2% of the value of your Investment Bond, which will be deducted before we declare any bonuses meaning that there are no additional charges for you to pay. This charge could increase, however it will never exceed 3% of the value of your Bond in any one year. The charges are designed to cover our costs for administering the Bond on your behalf. For more information about charges, please see the Investment Bond Key Features Document.

What happens if I/We die?

If you die and the Investment Bond is held solely in your name (single life) the proceeds from your Bond will form part of your estate for inheritance tax purposes.

If you die and the Investment Bond is held in both your name and another's name (joint lives), it is transferred into the sole name of the surviving policyholder.

The amount payable on death is 101% of the investment you have paid in (less any withdrawals) plus any bonuses. However, you can nominate a beneficiary(ies) to receive up to £5,000 following your death without having to wait for probate. Any excess would become part of your remaining estate and have to wait for probate. You can request a beneficiary nomination form from the Member Services department on 0800 786 4162 or memberservices@forestersfriendlysociety.co.uk.

Can the Investment Bond be written in Trust?

You can place your Investment Bond in Trust. You may want to take advice from a solicitor before doing this.

I am not sure if an Investment Bond is right for me. What should I do?

If you are unsure as to the suitability of this product you should seek advice from a Financial Adviser. You may have to pay for this advice.

Payments and access to the plan

How much can I invest in the Investment Bond?

You can invest a lump sum of between £1,000 and £150,000 into the Investment Bond. If you re-invest the maturity benefits of an existing Foresters Friendly Society plan the minimum amount you can invest is reduced to £500.

You can take out more than one Foresters Friendly Society Bond, although you should be aware that different terms may apply depending on when you take out the Bonds.

Can I make partial or regular withdrawals from my Investment Bond?

Partial withdrawals can be taken at any time subject to a minimum withdrawal of £250 and that the remaining value of your Bond does not fall below £500.

You can take regular withdrawals from your Bond on a monthly, quarterly, half yearly or yearly basis, if the value of your Bond is in excess of £5,000 at the time of starting withdrawals.

If you already hold an Investment Bond or Bonds with Foresters Friendly Society, you may choose to start withdrawals, subject to three months prior notice and meeting the other conditions as stated above.

If the value of your Investment Bond falls below £5,000 at any time the regular withdrawals will cease. The maximum regular withdrawal that can be taken at any time is 5% of your initial investment, not including any bonuses allocated to your Bond. The minimum regular withdrawal is £50.

Partial or regular withdrawals could reduce the value of your Bond to an amount less than you originally invested. For instance, if you choose to withdraw 5% per annum and the bonuses allocated are less than 5% per annum, your initial investment would fall.

Returns on the plan

Where is the money invested?

The money paid into the Investment Bond is invested in Foresters Friendly Society's with profits Order Insurance Fund. By spreading the money paid into the fund across a number of different types of investments you benefit from the exposure to a range of asset classes which may include stocks and shares, property and cash. An advantage of this approach is that if the return from any one particular asset type is poor, your investment may be protected from the full impact of this fall as the other assets forming part of the overall investment may perform better.

How much could I expect to receive?

The amount you receive will be made up of the total amount you have invested in your Bond (minus any withdrawals), plus any annual bonuses added during the time you held the Investment Bond for as well as a potential final bonus when you cash-in the Bond. The payment and value of bonuses depends on the performance of our Order Insurance Fund and the addition of any bonus is not guaranteed.

In adverse investment conditions we may apply a Market Value Reduction (MVR). This could mean you get back less than you have paid in. We will never apply an MVR if you die. We have not applied an MVR to date on the Foresters Friendly Society Investment Bond, however this could be applied in the future.

What interest does the plan pay?

The Investment Bond does not pay interest. Instead, the with profits Order Insurance Fund provides your Bond with the potential for growth by way of bonuses. What you receive depends on the performance of our with profits Order Insurance Fund. The investment performance cannot be guaranteed.

How do bonuses work?

At the end of each year, we aim to declare an annual bonus, based on how the Order Insurance Fund performs and the costs incurred. In addition, when you decide to cash-in your Investment Bond, Foresters may add a final bonus based on the overall investment growth achieved and expenses incurred.

This is different from a Bank or Building Society account where interest is added, because any growth on the investment with Foresters depends on the performance of the underlying fund.

Although in some investment conditions the growth in the Bond might not be as much as that on an interest-paying account, investing in this way means there is the potential for growth over and above the level which might be achieved on interest-paying accounts.

The addition of bonuses is not guaranteed and therefore it is possible that your Investment Bond might not receive any annual and/or final bonus.

Tax and the plan

What is the tax situation with regard to my Investment Bond?

Foresters Friendly Society pays tax on income and capital gains within the Order Insurance Fund. If you receive an age related personal allowance or child tax credit, these could be reduced when you take proceeds from your Bond savings. Gains from the Investment Bond on death, cash-in or surrender including any partial withdrawals are chargeable at the marginal rate of tax for higher rate taxpayers. Tax rules may change in the future and depend on individual circumstances.

If there are joint policyholders, each of them is treated as being liable for income tax in respect of half of the total chargeable event gain.

In the event of the death of the first of the joint policyholders, half the value (as at the date of death) is included in the valuation of the deceased's Inheritance Tax estate.

 

Taxation implications of partial/regular and full withdrawals from your Investment Bond

Partial/regular withdrawals - there are no immediate taxation implications for any partial or regular withdrawal you take from your Bond as long as no more than 5% of the initial investment is withdrawn annually. This is because current taxation rules allow for the withdrawal of the full amount invested spread over a 20 year period from the issue of the Investment Bond, without any taxation implications at the time of these withdrawals.

This means, for example, that if you have not made a withdrawal from your Bond in the first five full years since issue, you could take up to 25% as a partial withdrawal without any taxation implications at that time.

If you choose to make a partial withdrawal over the 5% annual limit this may mean there would be an amount of tax to pay at that time.

Full withdrawal - full withdrawal may mean there would be an amount of tax to pay at that time. As growth in the Investment Bond is considered to be basic rate tax paid, there are currently no additional taxation implications for basic rate tax payers.

Only those who are higher rate tax payers, or may be pushed over the threshold for the higher rate, during the financial year of withdrawal would be affected. In this case there would be an amount of tax to pay which is currently set at the difference between the basic rate and the higher rate of income tax. It is recommended that anyone in this category should obtain advice before making a withdrawal.

Tax rules may change and depend on individual circumstances.

About Foresters Friendly Society

Who is Foresters Friendly Society?

Foresters Friendly are a mutual society, founded in 1834 by ordinary people with a common purpose - to support each other through financial and other difficulties.

We've been looking after our members, and their finances, for over 180 years, offering care and protection through relevant affordable financial products.

Since 1834 our aim has been to be open, approachable, honest and fair, treating all our members as individuals.

We always put the interests of our members first.

How safe is my money?

You'll be pleased to hear that our funds have grown steadily over the years and our financial position remains strong. (Source: Reports & Accounts 2015). However, note that past performance is not a guide to the future.

However, if in the unlikely event that Foresters Friendly Society were to be declared insolvent, you would be able to make a claim under the Financial Services Compensation Scheme.

About Friendly Societies

What is a Friendly Society?

Friendly Societies have been around for hundreds of years. They were founded on the idea of mutuality - that if a group of people contributed to a mutual fund, an individual within the group could benefit in a time of need. The principles still apply - friendly societies are owned by, and operate in the interests of, their members. Unlike public limited companies, they use revenues to the benefit of their members rather than distributing profits to their shareholders.

How do Mutuals perform, compared to PLCs?

With no shareholders to answer to, mutual societies can ensure their profits are only used for their members’ benefits by sharing this amongst members, or re-investing to provide potentially better returns, better value or higher levels of service.

Over the last 10 years, the average mutual with-profits policy produced 29% more than an equivalent from a PLC insurer – that’s around £11,400 more after 25 years for a £50 per month policy.

(Source: Association of Financial Mutuals:  AFM Key facts about mutual insurers and friendly societies November 2014)

What is a Mutual?

UK financial organisations are either authorised by the Financial Conduct Authority (FCA) or the Prudential Regulation Authority (PRA) and can be regulated by one or both regulators, and are either mutuals or public limited companies (PLCs). Unlike a PLC, a mutual organisation has no external shareholders to pay in the form of dividends and does not seek to make large profits or capital growth.

Mutual organisations are owned and run for the benefit of their members and their profits are usually re-invested for the benefit of members, although some may be used for internal finance to ensure the mutual is sustainable, safe and secure.

Today, UK mutuals account for over £116 billion in revenue every year and 1 in 3 people in the UK are a member of at least one mutual. (Source: The Mid-Term Mutuals Manifesto 2013 and the Mutual 2013 Yearbook)

Membership and Extras

I read somewhere about benefits - but I imagine I pay for those somewhere?

When you take out one of our policies or plans, you automatically become a member of Foresters. As a mutual, we don't have to answer to external shareholders. Instead, we use all our profits to benefit our members. All Foresters customers can take advantage of Foresters Extras, a range of benefits we offer at no additional cost.

Do I get any additional benefits as a Foresters customer?

All our customers benefit from Foresters Extras, a range of benefits we offer at no additional cost.

Help and Support

Where can I get help?

For help and support, please contact Foresters Friendly Society.

Investment Bond - Extras >>

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