Everything you need to know about your annual bonus

At Shepherds Friendly we offer a range of tax-efficient savings plans for the whole family, including a Stocks and Shares ISA which can be opened by any adult, and a Junior ISA, which can be opened by a parent for their child.

The main aim of all of these plans is to grow your savings at a faster rate than you would achieve in a cash-based account, by investing in a range of assets, which include stocks and shares, property, gilts and bonds.

Therefore, in years when the investment performs well, we aim to add a boost to your savings, which we do by paying you a bonus into your savings plan. With any Shepherds Friendly savings plan there are two types of bonus that we aim to pay, an ‘annual bonus’ and a ‘final bonus’:

What is an Annual Bonus?

This is where we aim to pay out a bonus to our members once a year, and is based on how investments have performed relative to the market conditions that year. The level of bonus is subject to fluctuate each year and there is no guarantee we’ll pay one. However, we do aim to steady your investment journey by using a process known as ‘smoothing’. In its simplest form, this essentially means that we may retain some of the profits in particularly good years, but then continue to pay a bonus in particularly tough investment conditions.

What is a Final Bonus?

This is the bonus that we aim to pay when a plan comes to the end of its term and matures. Like all the bonuses we aim to pay, this bonus is not guaranteed and is paid if there have been more good times than bad in relation to market conditions throughout the term of the investment.

What will my bonus rate be?

With our ISA and Junior ISA, we have been able to pay out an annual bonus rate of 3% after all charges every year since the plan began, up until and including this tax year (2017-18). However, past performance is not an indicator of how your ISA could perform in the future, and although we will never recall bonuses once they have been paid, we may not pay one in years when the fund performance has been particularly poor. The reason for this is that the fund in which your savings will be invested in includes a wide range of commodities from stocks and shares and property to government and company bonds.

What is smoothing?

As investments in the stock market can go both up and down, we aim to even out your investment over the long term by applying a process known as ‘Smoothing’. This enables us to try and ensure that we can consistently pay an annual bonus to you every year.

To put this into context, when investment conditions are favourable and the fund has performed well, we may retain some of the profit in that period in order to compensate for future periods of market downturn. This helps to enable us to still pay you an annual bonus each year, even during poor market conditions.
If favourable market conditions remain constant throughout the term of your investment plan, we may reward you with any profits we have retained, in the form of a final bonus when the plan matures and you withdraw your money.

Unlike many other investments and savings plans that are more susceptible to market fluctuations, our investment strategy aims to ensure that the value of your investment is not affected by short-term stock market volatility and so the value will not fluctuate daily.

How do I check my annual bonus?

You can check the value of your savings anytime or anywhere by simply logging into the Shepherds Friendly online member log-in area, ‘Your Account’. Information regarding your most recent annual bonus will be found here. If you don’t already have a ‘Your account’ online log-in area set up, then you can register today by following these quick and easy steps:

1. Register online: Click here to confirm your personal details and begin the registration

2. Confirm your email address: You will receive an email from us asking to confirm your email address by clicking a verification link.

3. Confirm your mobile number: We will send a text message containing a six-digit pin code, which you need to enter when you register. Each time you log-in to Your Account, we will send you a new code to enter, which helps keep your account secure.

4. Confirm your home address: We will then send you a letter to your home address, with an eight-digit verification code. You only need to enter this the first time you log-in to your account.

5. Start using Your Account: Once you have your letter from us, you can complete the registration process and begin using Your Account.

For those members who choose not to register ‘Your Account’ online, we will send an annual bonus statement every year detailing the value of your plan, and how much your annual bonus is.

If you have any questions about our annual bonus contact our member services team.