Big Banks v Friendly Societies – who’s taking care of your money?

Want an alternative home for your savings? Why not consider saving with a friendly society?

In a climate where only 32% of consumers trust retail banks, and that figure falls to just 15% for investment banks (as reported by PwC), the UK’s friendly societies have an important role to play when it comes to providing fair investment opportunities to enable you to save for your, and your family’s, future.

Friendly Societies’ origins date back to the days before the welfare state, when a group of people got together to contribute to a mutual fund that they could then receive social and financial support from in times of need. At Foresters Friendly Society, we’ve been looking after our members, and their finances, for over 180 years. The Society’s mission is to make saving for the future an attainable goal for as many people as possible.

No shareholders to pay

As a mutual, member-owned business, Foresters Friendly Society has no shareholders to pay. Instead, any profits made are used for the benefit of Foresters policyholders (referred to as members) in the form of policy payouts and a member benefits package, which focuses on healthcare, educational support and discretionary financial assistance, all at no extra cost.

Simple, affordable savings plans

Foresters takes a responsible, long-term approach to savings and investments and provides plans that are simple and affordable – such as tax-efficient savings and investment plans – with a return that has the potential for more growth than that offered by traditional interest-only cash savings accounts, but is less risky than direct investments into stocks and shares.

Interested in finding out more about how friendly societies came about and why they are unique? We’ve a great little video that explains it all.

See 7 reasons a friendly society could be the right place for your savings for more information.

Please note:

The membership benefits we provide aren’t regulated by the Financial Conduct Authority and the Prudential Regulation Authority and are regularly reviewed by us to ensure they are relevant to our members.

This blog is intended to provide information, not financial advice, to help you make an informed decision about savings and investments. We do not offer financial advice. You should contact a financial adviser, who may charge a fee, if you want financial advice.

You should also be aware that in some investment conditions and depending on the savings product you have chosen, you may get back less than you have paid in.

Source

The PwC report: How financial services lost its mojo – and how to regain it, October 2014

How should I save for retirement?

It’s wise to have savings plans to top up your retirement provision

Do you know when you’ll retire? More importantly, do you know when you can afford to retire? A recent survey conducted by Foresters Friendly Society in association with Mature Times* revealed that two-thirds of respondents aren’t confident that they’ll have enough money to live on when they finish working. And, when you look at the numbers, it’s not difficult to see why.

The State Pension, currently just £6,029 per year, simply isn’t enough to support a comfortable retirement. Even with the addition of a workplace pension or other private pension schemes, the reality for most people is this: If you want to enjoy the retirement you’ve always imagined, you’ll need to have additional long-term savings plans in place.

For example, if you want a long-term savings plan that provides the opportunity for your money to grow, where interest is tax free, but you can still access your cash if you need to, then why not consider a Stocks and Shares ISA?

By taking out a Stocks and Shares ISA as a way to supplement your pension, you can:

  • Pay in monthly, or with a lump sum – currently up to £15,240 in the 2015/2016 tax year. Each April, you’ve a fresh allowance to use, giving you the opportunity to keep topping your ISA up.
  • Once your money is in there, it stays tax-free, year after year. Someone who’d filled their ISA allowance every year since they started in 1999 could now have getting on for £100,000, including interest protected from the taxman**.
  • You can withdraw money from your ISA free of tax, although different providers have different rules and conditions regarding withdrawals and access to your money.
  • Stocks and Shares ISAs are intended to be longer-term investments, which can potentially yield better returns than a Cash ISA.

But remember…

  • Depending on how long you’ve had the Stocks and Shares ISA and when you withdraw money, as with any investment linked to the stock market, there is the potential that you could get back less than you put in.
  • The opportunity for potential growth is dependent on the performance of the Stock Market, and any other asset types your money is invested in.

It’s a lot to think about. But, if you’re considering a Stocks and Shares ISA as a valuable addition to your retirement planning, why not take a closer look?

Please note:

Tax rules may change and depend on individual circumstances.

Inflation could erode the value of your money over time.

The content of this article is for information purposes only and does not constitute financial advice. We do not offer financial advice. If you’re unsure as to the suitability of a product you should seek advice from a Financial Adviser. You may have to pay for this advice.

Sources

* The Foresters Friendly Society Long-Term Savings and Retirement Survey was carried out during August 2015 in partnership with Mature Times and completed by 1,489 people.

** Martin Lewis – Six reasons why ISAs still beat other savings accounts

Pension freedoms: what can I do with a lump sum?

A Stocks and Shares ISA could provide a flexible solution

Thanks to the UK pension changes, getting your hands on your pension fund means you now have the freedom to spend it or let it carry on earning interest. It’s a big decision that could have a lasting impact on your golden years. If you’d like the opportunity to do a bit of both, then a Stocks and Shares ISA could be what you’re looking for.

Take it or leave it?

Let’s start with what the pension options are. Essentially, as long as you have a ‘defined contribution pension’, such as an individual or group personal pension or a stakeholder pension (the rules don’t apply to state pensions), and you reach age 55, you could:

  • Leave your pension untouched
  • Take cash out when you want it, but only 25% of each withdrawal will be tax-free
  • Take up to 25% as tax-free cash then use the remaining fund to buy an annuity (a scheme that provides you with a guaranteed fixed income for the rest of your life)
  • Take out your entire pension as a lump sum. If you do this, the first 25% will be tax-free, but the remainder will be taxed as income

Decisions, decisions?

There are many things to factor in when deciding what to do, but a couple of key ones are:

  • You might outlive your pension. If you take too much money out you could find that your fund doesn’t last as long as you do. Plus, although the money may be long spent, it could still be taken into account when determining whether you’re entitled to any benefits.
  • You could pay more tax. The first 25% of your pension is tax-free cash, the rest is treated as income for tax purposes. Take out a large lump sum and it could leave you with a large tax bill you might have avoided if you’d taken the money out gradually.

What’s tax efficient and flexible?

Deciding what to do with your pension fund is a big decision. If you choose to take out some of it and aren’t sure what to do with the money one option to consider is investing it in a Stocks & Shares ISA. Here’s some things to consider:

  • You can pay in lump sums – up to the annual ISA allowance, currently £15,240 for the 2015/2016 tax year. Each April, you’ve a fresh allowance to use which means you can keep topping your ISA up
  • Once your money is in there, it stays tax-free, year after year. Someone who’d filled their ISA allowance every year since they started in 1999 could now have getting on for £100,000, including interest protected from the taxman*.
  • You can withdraw your money free of tax, although different providers have different rules and conditions about when you are able to access your money.
  • A Stocks & Shares NISA is intended to be a longer-term investment, which can potentially yield better returns than a Cash NISA

But remember…

  • Depending on how long you’ve had the ISA and when you withdraw money, as with any investment linked to the stock market, you could end up getting back less than you put in.
  • ISAs provide an opportunity for potential growth of your money but this will depend on the performance of the Stock Market and any other asset types your money may be invested in.

Please note:

Tax rules may change and depend on individual circumstances.

The content of this article is for information purposes only and does not constitute financial advice. We do not offer financial advice. If you’re unsure as to the suitability of a product you should seek advice from a Financial Adviser. You may have to pay for this advice.

*Source: Martin Lewis Six reasons why ISAs still beat other savings accounts

How much can I save in an ISA? And other essential ISA rules

Interested in ISAs as a way to save money? Here are answers to some frequently asked questions…

“If you’ve got any savings, or investments, you should have an ISA – it’s as simple as that. The reason? You pay less tax (or no tax in the case of cash savings) and therefore increase your returns. It’s a no-brainer!” So says moneysavingexpert.com’s Martin Lewis*, a financial whizz who knows just about everything there is to know about making the most of your money.

So, how much can you save? Do you need a lump sum? How many ISAs can you have? What’s the ISA limit? Read on for answers to some common ISA queries…

Q: How much can I save?

Every tax year (which runs from April to April), you get an annual ISA allowance and this is the maximum that you can save or invest in these accounts during that year. This allowance isn’t rolled over if you don’t use it, but you get a new allowance with the next tax year.

For the 2015-2016 tax year (which runs up to 5 April 2016), the annual ISA allowance is £15,240 and you can choose whether to invest the whole amount into a Stocks and Shares ISA or a Cash ISA – or whether to save into both types of ISA.

The allowance has traditionally risen each year with inflation, however, it is set to stay the same for the 2016/17 tax year.

Q: What’s the main difference between Cash ISAs and Stocks and Shares ISAs?

In a nutshell, Cash ISAs have no investment risk and are more like an ordinary savings account, except unlike a savings account you don’t pay any tax on your interest. Stocks and Shares ISAs on the other hand provide an opportunity for better returns by investing your savings in different asset types such as stocks and shares. They are more suitable for long-term savings of five years or more and, depending on the performance of the Stock Market and any other asset types your money may be invested in, the value of your investments can fall as well as rise.

Q: What’s the difference between ISAs and NISAs?

There’s no difference at all – they were originally called ISAs, and when the government changed some of the ISA rules in the 2014 Budget, they called them the New ISAs, or NISAs. Providers use either name now.

Q: Do I need a lump sum to invest in an ISA?

No. You can open a cash ISA with just £1. With Stocks and Shares ISAs different providers have their own minimum requirements.

For example, Foresters Friendly Society’s Stocks and Shares NISA allows you to choose whether you invest regular amounts from £50 per month, or lump sums which requires a minimum £500 to open the NISA and then top-ups of at least £250.

Q: How many ISAs can you have?

Every UK resident can put money into one Cash ISA and one Stocks and Shares ISA in each tax year. The ISAs don’t have to be with the same provider, and you can transfer either or both ISAs to another provider at any time, but you can’t take out two Cash ISAs or two Stocks and Shares ISAs in the same tax year.

Q: How old do you need to be to open an ISA?

You have to be aged 16 or over to open a Cash ISA, or aged 18 or over to open a Stocks and Shares ISA.

Q: How easy is it to transfer money from one ISA to another?

You can transfer funds held in an ISA from one provider to another as long as they accept transfers – not all of them do, so make sure to check (Foresters Friendly Society does, and will arrange the transfer process for you). Money held in a Cash ISA can be transferred into another Cash ISA or into a Stocks and Shares ISA, and likewise, assets held in a Stocks and Shares ISA can be switched back into a Cash ISA should you wish.

The important thing is not to just withdraw the money, close the account and reinvest in another ISA – transferring is key. Withdrawing rather than transferring will mean you lose the tax-free advantages of saving in that way, and if you have several years’ worth of ISA savings in cash (i.e. more than £15,240), you can’t automatically put it all into a new ISA, unless you transfer the account itself.

Q: How do I get money out?

You can withdraw money much as you would with any other savings or investment plan, bearing in mind that as with savings accounts, different ISAs have different rules.

For example, you can withdraw money at any time from an instant access Cash ISA, but you may pay a penalty if you withdraw cash from a fixed rate or regular savings Cash ISA within a set period.

Some Stocks and Shares ISAs may set a minimum amount for withdrawals, although, as with Cash ISAs, you will always benefit from the tax advantages whenever you decide to withdraw your money.

So, now you’re up to speed with all the basic ISA rules, why not find out more about Cash ISAs and Stocks and Shares ISAs.

Please Note:

A Stocks and Shares ISA is intended to be a longer-term investment, which can potentially yield better returns than a Cash ISA. The Stocks & Shares ISA is available to anyone over 18 years old. You should be aware that you may not get back what you pay into a Stocks & Shares ISA dependent on the investment term and investment conditions on withdrawal.

Tax rules may change and depend on individual circumstances.

The content of this article is for information purposes only and does not constitute financial advice. We do not offer financial advice. If you’re unsure as to the suitability of a product you should seek advice from a Financial Adviser. You may have to pay for this advice.

Source

* Martin Lewis – MoneySavingExpert – Full ISA guide

We think Martin Lewis is great, but he does not endorse any Foresters products.