As we’re sure you are aware, the United Kingdom will be leaving the European Union (EU) after the British public voted in a historic referendum in June 2016.
In leaving the EU, the UK looks likely to leave the Single Market, the European trade bloc that allows free movement of goods and people across international borders. This could present significant challenges to some businesses, particularly those that have high exposure to the EU.
At Shepherds Friendly we’re a fully UK-based company; all our transactions and operations are conducted within the UK, and the Shepherds Friendly Board would like to reassure all of our members that this period is very much business as usual.
Shepherds Friendly is a long-established and successful mutual, which has been around for almost 200 years and has experience in managing our members’ finances through varying economic conditions.
How we’re preparing for leaving the EU
Our With-Profits savings plans are invested in a fund which holds a broad mix of assets. The aim of this fund is to reduce risk by spreading investments over a range of equities which themselves have different risk profiles. This fund is actively managed by our fund managers, LGT Vestra, with the aim of achieving the best returns possible on our members’ investments, whilst investing in a sensible and responsible manner.
The Board of Shepherds Friendly has been undertaking contingency planning on the possible impact of Brexit for some time, a process that has involved our professional advisers, actuaries and investment managers. In terms of the Society’s investments, the investment managers have been tasked with looking at de-risking the portfolio given the markets strong start to 2019. Indeed, as markets have risen the investment managers have reduced risk by reducing equity exposure and locking in some of the investment returns, we have already made so far this year.
As we head towards leaving the EU our investment managers will continue to lower the overall risk profile of the Society’s portfolio in order to protect our members’ funds.
Our process of ‘smoothing’ to protect your investments
At Shepherds Friendly we use a process known as ‘smoothing’ to protect our members’ investments from poor market conditions. As the value of the annual bonuses we pay depends on the performance of the Fund, we use smoothing to try to minimise the effects of stock market fluctuations and to meet our aim of paying our members an annual bonus.
When investment conditions are good, we may decide to hold onto some of the profit achieved in that period in order to compensate for any time when circumstances are less favourable. This means that during poor investment environments we may still be able to pay a bonus from the reserves we have acquired.
Unlike some more volatile stocks and shares investments, the value of our With-Profits plans will not fluctuate daily. Our plans are designed to offer returns in the medium to long-term.
How we performed in 2018
2018 was a challenging year for investments, with financial markets in a state of volatility for much of the year. The FTSE share index lost 12.5% of its value, the biggest fall in a decade, as markets reacted to worldwide political uncertainty. Despite this, we were delighted to announce to our members that we would be paying a bonus for the 16th consecutive year, something that we’re able to achieve due to our investment strategy.
What can you do to protect your investment in uncertain conditions?
During times of uncertainty people may become vulnerable and susceptible to messaging encouraging them to change investment decisions and transfer money to apparently more lucrative schemes.
Fraudulent companies and individuals tend to use this opportunity to push through many messages using fear and pressure, encouraging people to change or cash-in their products, or use this opportunity to steal your personal information. We encourage our members to remain vigilant, take care and take time to consider any decisions or changes you want to make to your financial products before doing so, in particular when the suggestion to act has come from an unsolicited third party.
The Financial Conduct Authority (FCA) has a dedicated consumer website with more information on how you can identify, avoid and report a scam, which can be accessed here: http://www.fca.org.uk/consumers
For more information on how individuals can prepare for Brexit, the government has also launched a website that you might find useful. It can be accessed here: https://euexit.campaign.gov.uk.
For any questions about your plan please call us on 0161 428 1212 or send us an email at [email protected]
If you decide to close your plan and leave the Society or transfer your investment to another provider, a Market Value Reduction (MVR) may be applied. For more details please see the PPFM document available on our website.
*When you take out an investment product with us your capital is at risk and you may get back less than you have put in. Investment growth is by means of bonuses, the amount of which cannot be guaranteed throughout the term of the contract.*