This Members Update is designed to keep you as well informed as possible about the financial plans we offer and how we manage your money. It is just part of our committment to keeping our plan holders informed and involved in our day-to-day business.
How do Tax-Exempt With-Profits Savings Plans work?
Shepherds offers three plans that operate on this basis: our Bonus Plan, our Junior Moneymaker and our ISA. Premiums received from members with any of these plans are invested in the Society's With Profits Fund, which has holdings in cash deposits, government gilts, commercial bonds, equity shares and commercial property.
Growth in the value of these investments is shared out with our planholders in the form of bonuses which are added as annual bonuses and cannot be taken away. When a plan matures a final or terminal bonus may be added.
Our Bonus Plan and Junior Moneymaker plans also provide life insurance cover (referred to as the "sum assured"), which means that should the insured individual die before the plan matures,this sum plus any declared annual or final bonuses will be paid out.
How has Shepherds With-Profits Fund performed over the past seven years?
Like all investment vehicles, the With-Profits Fund is naturally affected by the prevailing stock market conditions. However as you can see from the chart below which compares the Fund's performance against that of Bank of England Base rate and the FTSE 100 portfolio, its performance has generally been positive.
What return would a typical recent 10 year Bonus Plan have produced?
The example below shows a typical return over 10 years, if started in the year 2000.
| Premium |
£25 per month |
| Total paid over full term |
£3000.00 |
| Sum Assured |
£2595.00 |
| Bonuses |
£487.86 |
| Final Bonus Rate |
110.00% of existing bonuses |
| Final Bonus |
£546.65 |
| Maturity Value |
£3619.50 |
What is the difference between a "With Profits" investment and a "Unit Linked" investment?
In a unit linked plan premiums are used to buy "units" and the value of these units will depend on the investment assets that make up that plan. You can check the value of such a plan at any time by multiplying the number of your units as shown in your annual statement by the price of those units which is also shown in your statement.
With a With Profits plan you need to wait for the annual bonus to be declared to see how much your investment has grown; while the value of any final bonus is not known until the plan ends.
In a unit linked plan its value can change on a daily basis depending on the fluctuating value of the underlying investments. If your plan matures or you choose to surrender it when investment markets are at a low point, you may get a poor return.
With a With Profits plan the intention is to flatten out any market peaks and troughs during its lifetime.Each annual bonus when added can not be taken away and any final bonus added is based on investment market performance throughout the life of the plan.
This investment process is known as "smoothing" and the value of your plan is intended to grow in a more even way.
Why are some Shepherds plans known as "Holloway-style" plans?
Savings plans designed to provide an income if people were unable to work due to sickness or an accident were originally the idea of a 19th century MP by the name of George Holloway. These Holloway plans are only available from Friendly Societies such as Shepherds and they do offer distinct benefits in their unique combination of protection and tax-free savings.
There are two elements to these plans; part of the premiums paid is allocated to the cost of providing income protection, while the remainder is invested in the planhoder's account to eventually provide a TAX-FREE lump sum at maturity.
Need any more information on your Shepherds plans?
If you have any questions or would like more information about any of your Shepherds plans, simply call Head Office on 0161 428 1212 or contact us here through our website.