Questions and answers
What is the Bonus Plan?
The Bonus Plan is a ‘with-profits endowment assurance’, designed to provide tax-exempt or taxable savings (or both) and life assurance cover over a period that we agree with you (see below for what we mean by tax-exempt).
What do you mean by tax-exempt investments?
We have a special tax-exempt status. If you pay premiums which add up to no more than £25 a month or £270 a year, we do not have to pay tax on the increase in value of the fund, or on income from our investments.
The proceeds that we pay out if you die, or at the end of the plan will be free of any tax liability (this means that you will not pay any income or capital gains tax). Laws on tax may change in the future.
Who can have a Bonus Plan?
As long as you are aged between 16 and 55 next birthday, and you pay premiums for at least 10 years, you are eligible for a Bonus Plan.
How much can I save?
You must pay at least £10 into the plan each month, up to £200 a month.
Only premiums up to £25 a month or £270 a year can go into a tax-exempt plan.
If you pay in more than £25 a month, or £270 a year, we will set up a separate plan for the extra money. This will be treated differently for tax purposes.
How will my investment grow?
We will invest your premiums in our With Profit Fund, which holds a mix of assets including stocks and shares, property, gilts, bonds and cash. The market values of these assets move up and down over time but such movements are outside our control. These movements may affect how much we add to plans as bonuses.
The aim of the Fund is to provide each customer with steady investment growth over the full savings period of their plan. To do this we keep back some of the investment returns we make in good years so that we can pass them on in years when performance is not so good. We add the returns as a yearly bonus. Once we have added a yearly bonus to a plan, we guarantee to include it in the amount we pay out when the plan reaches the end of the agreed period.
We may pay an extra bonus, called a final bonus, depending on how the fund has performed.
You can find out more information about how our fund works in our document called A guide to how we manage our with-profit business.
What might the benefits be after 10 years?
| Example of tax-exempt plan |
| Age (next birthday) |
30 |
| Monthly premium |
£25 |
| Contract term |
10 years |
| Total payments after 10 years |
£3000 |
| If your investments grew at 5% a year your fund after 10 years would be £3280 |
| If your investments grew at 7% a year your fund after 10 years would be £3620 |
| If your investments grew at 9% a year your fund after 10 years would be £4000 |
Will my investments work out exactly as in the example?
The example we’ve provided is meant to be an illustration of what your investment may be worth. What you will actually get back depends upon how our investments perform.
You could get back more or less than this.
All Friendly Societies who offer life assurance plans use the same rates of growth for their illustrations, but their charges vary.
Do not forget that inflation could reduce what you could buy in the future.
|
WARNING - Lower growth rates of 4%, 6% and 8% apply to premiums above £25 a month. They are not Tax-Exempt.
|
What happens if I die?
The plan will provide a guaranteed sum which will be the smallest amount we pay out if you die unless you have stopped paying your premiums. This amount will depend on your premiums and your age at the start of the plan.
We will also include any yearly and final bonuses in the amount we pay if you die.
What happens if I need to stop paying my premiums?
If you need to stop paying premiums, you should contact our head office as quickly as possible to discuss what options are available to you.
You may be able to send us the premiums you have missed by cheque.
1 If the plan started less than one year ago, we will cancel your plan and you will not get any money back and the life cover will stop.
2 If the plan started more than one year ago, you can ask for a ‘cash in’ value and take your money and the life cover will stop. We may apply a ‘Market Value Reduction’ when you cash it in. So, this means that the amount you might get back may be less or more than the amount we told you on your last bonus statement. (To find out more about this, see the next section ‘What is a Market Value Reduction?’)
3 If the plan started more than two years ago and you do not take your money, we will make the plan “paid-up”automatically 13 months after the date when you paid the last premium. If this happens, the amount of life cover will reduce and you will receive a lower lump sum at the end of the plan.
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WARNING - If you stop paying premiums during the early years, the value of your plan could be less than you have paid in.
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What is a Market Value Reduction (MVR)?
If you cash in your investment before the end of the plan and our investment returns have been low we may use a Market Value Reduction to make sure you do not leave the fund with more than your fair share of assets. This is to protect plan holders who still have money in the fund, but it may mean that you receive less than you expected.
We would not use a market value reduction if you died or at the end of the plan.
What are the charges for?
We take charges from your plan to cover our expenses, the cost of administering your plan and managing your investments. We will reduce the amount you get back from your plan if you stop paying your premiums before the end date of the plan.
How do these charges affect my plan?
For a 10 year plan the effect of these charges are currently around 40% of the first year's premium and 10% of each subsequent year's premium. These are the current charges that we apply but they may vary in future years in line with the expenses of the Society. Please see the CFPPFM for more information.
The last line of the table below shows that over the term to the plan’s end date, the cost of the deductions could add up to £672. Putting it another way, leaving out the cost of the life assurance, this would effectively bring the investment growth down from 7% to 3.8%.
| Example of tax-exempt plan deductions |
| The figures below assume the investments will grow at 7% a year |
| Age (next Birthday) |
30 |
| Monthly Premium |
£25 |
| Contract term |
10 years |
| Year |
Total paid in to date |
Effect of deducions to date |
What you might get back |
| 1 |
£300 |
£311 |
- |
| 2 |
£600 |
£202 |
£442 |
| 3 |
£900 |
£248 |
£752 |
| 4 |
£1,200 |
£297 |
£1,080 |
| 5 |
£1,500 |
£350 |
£1,430 |
The later Years:
| Year |
Total paid in to date |
Effect of deducions to date |
What you might get back |
| 10 |
£3,000 |
£672 |
£3,620 |
| These figures are only examples; they are not minimum or maximum amounts. What you will get back depends on how your investments grow |
How much will any advice cost?
Your financial adviser (if you have one) will give you details about the cost of advice. The amount will depend on how much you are paying each month and the length of your plan.
Where can I find out more?
Before the child’s plan starts we will send you the full terms and conditions. These explain how the plan works.
If you would like to see these terms and conditions before you apply please contact us:
Phone: 0161 428 1212
Fax: 0161 428 3666
Email: info@shepherdsfriendly.co.uk
Website: www.shepherds.co.uk
More information
Claims - to make a claim please contact us by phone on 0161 428 1212 and ask for the Claims Department. They will explain the claims process and send out a claim form.
Cancellation Rights - after we accept your application, we will send you a notice of your right to cancel. You will then have 30 days to change your mind and leave the plan.
Complaints - If you want to make a complaint; please contact:
Compliance Officer
Shepherds Friendly, Shepherds House Stockport Road Cheadle SK8 2AA
Phone: 0161 428 1212
Email: info@shepherds.co.uk
If we don’t deal with the complaint to your satisfaction you can complain to the:
Financial Ombudsman Service, South Quay Plaza, 183 Marsh Wall, London E14 9SR. Phone: 0845 080 1800.)
Making a complaint will not affect your right to take legal action.
Past Performance - please note that past performance is not a guide to future performance. It is important to understand that future bonuses depend on profits yet to be earned and, as a result cannot be guaranteed.
Financial Services Compensation Scheme (FSCS) - we are covered by the FSCS, which means you may be entitled to compensation under the terms of the scheme if we cannot meet our obligations. This depends on the type of business and the circumstances of the claim.
For long term plans such as this the scheme covers 90% of the claim with no upper limit. You can get more information about the scheme from the FSCS-
7th Floor
Lloyds Chambers
Portsoken Street,
London
E1 8BN.
Financial Crime - we will take measures to protect members against Financial Crime. We may need proof of identity of the child at the end of the plan and if required we may gather this proof by electronic means.
Tax - information that we provide in this leaflet about taxes in the UK is based on our understanding of current laws and HM Revenue and Customs practice which may change in the future.
The Data Protection Act - you have the right to ask to see any personal information we may hold about you or your child and to have any mistakes in this information corrected. You can do this by writing to the data protection officer at our head office. There may be a charge for this.
Law - the Plan is governed by the laws of England and Wales.
The Shepherds Friendly Society Limited
Registered Office:
Shepherds House,
Stockport Road,
Cheadle, Cheshire SK8 2AA
Phone: 0161 428 1212
Fax: 0161 428 3666
Email: info@shepherdsfriendly.co.uk
Website: www.shepherds.co.uk
The Head office and Registered office of The Shepherds Friendly Society is based in the United Kingdom.