With such a wide variety of financial institutions out there, it can be difficult to decide which one you should entrust your money with. After all, that money might be for a rainy day, for your retirement, or even your child’s future. You want that money to be looked after, and to grow over time.
Friendly societies are different to other financial institutions that you’ll find on the high street, but how so? Here are some of the reasons why…
They’ve been around for hundreds of years
Friendly societies aren’t a new concept; they’ve existed for hundreds of years. Originally, they were set up to ensure that working people could receive financial aid in times of need. Essentially, a group of people would all contribute to one fund – contributors could then receive money should they fall ill and need financial help with keeping their household going, for example. Friendly societies existed before the welfare state as a way for working people to receive support when they needed it most.
No shareholders
Because friendly societies are owned by their members, they don’t have shareholders. This means the profits can be used to directly benefit their members. For example at Foresters Friendly Society, profits are used to enhance customer services, for policy payouts and to provide the Foresters Extras membership benefits package.
To become a member of Foresters Friendly Society, all you have to do is take out a savings plan or annual membership. By doing so, you’ll be provided with a wide range of discretionary benefits, and you’ll have some control over how the Society is run. Please note that Foresters membership benefits are not regulated and are regularly reviewed to ensure they remain relevant to Foresters members.
The customers come first
The fact that friendly societies are managed and owned by their customers (also referred to as members) mean they strive to provide a great service. They also look after your money, by taking a responsible and long-term approach to your investments and savings.
Affordable, manageable savings
Friendly societies believe that everyone should be able to put away some of their hard earned cash, which is exactly why friendly societies such as Foresters Friendly Society offer affordable savings plans.
At Foresters, children’s saving plans start from just £15 a month when taken out online or £25 when taken out via post, and adult’s regular savings plans cost as little as £25 a month.
Even putting away a small, affordable amount of money each month can help to build a savings pot over time. Foresters Friendly Society also offers regular premium and lump sum contribution Stocks & Shares NISAs and one-off lump sum Investment Bonds. Please note you may get back less than you have paid in to some plans dependent on investment conditions.
They offer products the high street can’t
Due to their unique legal status, friendly societies can offer tax-free savings products you won’t find on the high street. A Tax Exempt Savings Plan, for example, can be held alongside a NISA, and provides you with a cash sum payout at maturity, which is free of both income tax and capital gains tax.
Please note that tax rules may change in the future and depend on individual circumstances.
In summary, the benefits of friendly societies are:
- You have some control over how the society is run
- The profits generated are used for the society’s member benefits as well as potential policy bonuses, as there are no shareholders to pay. Please note that bonuses are not guaranteed
- They offer products you may not find at other financial institutions
- They’ve been around for hundreds of years
- Savings plans are affordable and manageable
I echo Andrew’s point, my Foresters Friendly Society 10 year policy is maturing in June, at £3077.64, the equivalent of 0,56% pa interest over the 10 year perion it ran for. To be honest I’m not at all surprised as they are not efficiently run in the least, constantly posting reports and invitations to society events, they must have blown more that te intert on postage over the 10 years.
In my opinion mutuals all suffer from a lack of decent goverenance – you only have to look back at Equitable Life to see how true that is. Unskilled memberships may well “own” mutuals, but if they are not capable of offering effective challenge to the execs it is pointless.
The returns on this type of financial product are quite poor. I saved £25/month for 18 years and received the equivalent of 3% interest annually. Whilst that would be attractive in the current savings rate apocalypse, it is less so looking at rates since 2002. A simple FTSE tracker would have significantly outperformed this outdated model with its unnecessarily high fees.
A good point, Andrew. Thank you, though it would depend on your view about where the FTSE is heading over your intended invetment duration.