Foresters Friendly Society: savers should know about with profits investments

Wednesday, July 9, 2014

It's time to raise the flag again for With Profits savings plans. While there's no denying that these funds have come in for their share of criticism over recent years, Foresters firmly believes that they offer a good solution for a significant proportion of today's hard-pushed savers.

"Those longer term savers who are frustrated by the low interest rates offered by traditional savings accounts but can't afford to take a significant risk with their money, may find that With Profits offers a comfortable middle ground," says Paul Osborn, Foresters Friendly Society's Chief Executive.

While money invested in them has the potential for more growth over the long term than it would in a traditional interest-earning savings account, they're a less risky option than investing in stocks and shares alone. While they're never going to bring home the potential rewards offered by high-risk investments, they offer the chance of a steadier return year on year because they're invested across a range of assets and iron out the ups and downs of the stock market over the investment period.  As with many savings plans, there is still a risk that in certain circumstances you may get less back than you paid in, but this is lower than with some other investments, such as direct investment into stocks and shares.

In short, they're an alternative option for the cautious investor, particularly in the current economic climate. Foresters believe it's time that potential investors were made more aware of the benefits of With Profits.

While With Profits came in for some criticism a few years ago, largely because some providers were over-generous with initial bonus payments and faltered further down the line, the highly respected annual survey by Money Management magazine* found reasons to cheer about them this year. It revealed an improvement in With Profits payouts and Foresters Friendly Society was one of the providers commended for its performance. Past performance is not a guide to future performance.

Foresters Friendly Society demystifies With Profits investments in its new video

While Foresters would like more people to know about the benefits of With Profits, it acknowledges that many people don't understand how they work.

So, how do you make a complex financial product engaging and easy to understand? Mr Money, the star of a new video about With Profits - walks viewers through a simple guide to these savings plans and explains why they sit comfortably between low-risk traditional savings accounts and higher risk stock market investments.

"We think we've done a good job of demystifying a complex financial product," said Claire Day, Online Marketing Executive for Foresters Friendly Society, who created the video with Bristol-based content agency Specialist.

Paul Dicken, Senior Finance Editor at Specialist, added: "It's pretty groundbreaking for a subject like this. It's bold and inventive, and probably one of the only animated videos out there about a topic like this."

Friendly Societies: no stakeholders means more focus on members

While consumer trust in banks and building societies is still shaky, friendly societies such as Foresters offer an appealing alternative. As mutuals, they are member-owned businesses with no shareholders, so instead of focusing on making profits for shareholders, any profits made are distributed to members through bonuses and benefits. 

* Source: The Money Management Survey, April 2014, looked at maturity values as at 1 February 2014 for a male aged 30 paying £50 a month into a With Profits policy.  These figures are then compared with the figures from other providers to compare companies' past performance.