Investment Bond

Invest a lump sum in a Friendly Society 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 planholders are automatically treated as holding equal shares in the Investment Bond. If one planholder dies, the other automatically becomes the sole planholder of the  Investment Bond. If an Investment Bond is set up in joint names this will be on a second death basis. That is, the death claim is not paid until the death of the second of the two lives and the Bond comes to an end at this stage.

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

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

You can cash-in your Investment Bond whenever you want but you may get back less than you have paid in. The cash-in value will depend on the amount invested, the amounts that have been withdrawn and any annual bonuses that have been added.  This is called the accumulated fund. Depending on the investment returns achieved and our costs, we may also add a final bonus to the accumulated fund in favourable investment conditions. Conversely, in adverse investment conditions we may apply a Market Value Reduction (MVR) which will reduce the accumulated fund.  

What is a Market Value Reduction (MVR)?

This is a deduction we may make when you fully or partially withdraw your Investment Bond or the Investment Bond is paid out on the death of a single planholder or the death of the last surviving planholder for joint life Bonds.. Its purpose is to be fair to planholders leaving the Fund and those staying by ensuring that the amount paid is not unfairly higher than the market value of the Bond's assets and that a fair share is left for the remaining planholders. This adjustment will reduce the accumulated fund at that time and in some circumstances could mean that you get back less than you have paid in. The reduction for death benefits will not exceed 30%, i.e. the minimum guaranteed payment on the death of a single planholder, or the death of the last surviving planholder for joint life Bonds, will be 70% of the accumulated fund.

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 Information Document and Important Information.

What happens if I/We die? 

The death benefit will depend upon the initial amount invested, the amounts you have withdrawn and any annual bonuses that have been added – this is called the accumulated fund. Depending on the investment returns that have been achieved and our costs, we may add a final bonus to the accumulated fund in favourable investment conditions. Conversely, in adverse investment conditions we may apply a Market Value Reduction (MVR) which will reduce the accumulated fund. However, irrespective of the investment conditions, the guaranteed minimum amount payment on death of the single planholder, or the death of the last surviving planholder for joint life Bonds, will be 70% of the accumulated fund. In adverse investment conditions this means that the amount payable could be less than you have paid in. In more favourable investment conditions the amount payable could be greater than you have paid in.

If the Investment Bond has been taken out by joint planholders, in the event of the first death of one of the planholders, half the cash-in value of the Investment Bond at the date of death is included in the valuation of the deceased’s Inheritance Tax estate.

On death, the proceeds from your Investment Bond will form part of your estate for Inheritance Tax purposes. However, you can nominate a beneficiary to receive up to £5,000 following your death without having to wait for probate. You can request a beneficiary nomination form at any time from the Member Services Department on 0800 988 2418 or memberservices@forestersfriendlysociety.co.uk.

If the Investment Bond has been taken out by joint planholders, in the event of the first death of one of the planholders, half the cash-in value of the Investment Bond at the date of death is included in the valuation of the deceased’s Inheritance Tax estate.

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 £5,000 and £150,000 into the Investment Bond.

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 after the withdrawal 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 accumulated fund 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.

Taking withdrawals will reduce your accumulated fund. With partial or regular withdrawals, there is always the risk that your chosen amount of withdrawal could reduce the accumulated fund 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 accumulated fund would fall below the level of your initial investment.

In adverse investment conditions we may apply a Market Value Reduction at withdrawal. At these times the accumulated fund will be reduced by more than the amounts withdrawn. Conversely, if there is an entitlement to a final bonus, the accumulated fund will be reduced by less than the amounts withdrawn. See the section above for details of the Market Value Reduction.

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.  The Society’s Board of Directors reviews and approves the asset classes that the Society is permitted to hold in pursuit of its investment strategy, taking recommendations from the Investment Committee.  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. Thus the fall in value of one asset class (e.g. shares) may be cushioned by the potential better performance in another asset class (e.g. property).

Please see the Principles and Practices of Financial Management (PPFM) for the latest information on our investment strategy.

How much could I expect to receive?

The amount you receive will depend upon the amount you have invested in your Bond (minus any withdrawals) and any annual bonuses added during the time you held the Investment Bond for. In favourable investment conditions a final bonus could be added 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. Please refer to the Important Information document for further information on how our Order Insurance Fund works.

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. In some investment conditions, a Market Value Reduction (MVR) may be applied and you may get back less than you have paid in.

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 planholders, 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 planholders, 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 withdrawals as long as no more than an annual allowance of 5% of the initial investment paid into your Bond is withdrawn each year. Any part of the 5% allowance not used in a given year is carried over to the following year until you have used up the total allowance which equals the initial investment made.

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

If you choose to make a partial withdrawal in excess of the 5% annual limit this would bring about a chargeable event and that we would have to inform HM Revenue and Customs of. For higher or additional rate taxpayers this means that there may be an amount of tax to pay.

Full withdrawal - full withdrawal is always considered to be a chargeable event, so Foresters Friendly Society would have to inform HM Revenue and Customs. As growth in the Investment Bond is considered to be basic rate tax paid, there are currently no taxation implications for basic rate tax payers.

If you are a higher rate or additional rate taxpayer you will have to pay tax on a gain arising in the tax-year of full withdrawal. The rate of tax payable is the difference between the basic rate of tax and your current rate of tax. If you are currently a basic rate tax payer but the chargeable gain when added to your income takes your income into the next tax bracket, top-slicing relief is available which can reduce the tax payable.

If the Investment Bond has been taken out by joint planholders, each of them is treated as being liable for income tax in respect of half of the total chargeable gain.

It is recommended that if you are a higher or additional rate tax payer or close to the next tax bracket, you should obtain advice before making a withdrawal in excess of 5% in any year. Any tax payable depends on personal circumstances and tax rules may change.

If you receive age related personal allowance or working or child tax credit, these could be reduced when you take the proceeds from your Investment Bond.

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 2017). 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.

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.

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.

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