tax efficient savings

What Is A Tax Efficient Savings Plan?

13th July 2015

All the saving plans that we offer here at Shepherds Friendly Society are tax efficient. Now, this sounds great, and it really is a great benefit to growing your money, but many people may be confused about what it actually means.

Tax efficient savings

Long term saving is so important, but with constant demands from your income, we understand how hard it can be to put aside even a little bit of money per month.

Tax efficient savings plans are free of both income and capital gains tax, which means even more money for you. They are a long term investment, which means there is a bigger potential for investment growth. Also, tax efficient saving plans are not just for adults, there are versions for children to save as well.

To help you save money for the long term, if you put your savings into a tax efficient savings account you won’t pay income or capital gains tax on what you save, up to a certain limit.


Every UK resident gets an ISA allowance to save tax free, which usually increases each tax year.  ISAs are protected from the taxman, so any returns grow free of income and capital gains tax. ISAs can work really well for long term savings regardless of your budget, and there are even ISAs for children called Junior ISAs. There are two difference types of ISA available and each one has a different set of rules.

Cash ISA – A cash ISA offers tax efficient savings in a deposit account, usually run by a bank, building society or mutual society. The ISA keeps your investment intact, and can offer a reasonable rate of interest. The majority of cash ISAs are instant access accounts; however there are some which lock your money in for a set period of time.

Stocks and Shares ISA – A stocks and shares ISA can hold an investment fund or funds, or individual stocks and shares. This type of Isa carries risks, and should be regarded as a medium to long-term investment.

Junior ISA– A Junior ISA is a long term tax efficient saving account for children under the age of 18. They are offered as both cash and stocks and share ISAs, and parents can apply for one of both types of ISA for their child. Parents or guardians with parental responsibility can open a Junior ISA and manage the account, but the money belongs to the child.

The child can take control of the account when they’re 16, but can’t withdraw the money until they turn 18.

Help to buy ISA

The help to buy ISA is a new product that has been introduced to help first time buyers save towards the cost of their first home. Savers will be able to make an initial deposit of £1,000 when they open a Help to Buy ISA and then receive £50 for every £200 saved up to a maximum of £12,000. The tax break will be capped at £3,000.

If you are interested in a help to buy ISA we recommend that you speak to a financial adviser.

What other options are there?

Bonus plans

Our Shepherds Friendly Society Bonus plan is another tax efficient savings plan that we offer. It has been designed to help members save money on a monthly basis for a long term future, where money is invested for a minimum of 10 years in order to try and achieve the best growth potential possible.

You can not draw money out of this plan for 10 years without possibly suffering from a penalty, which makes it slightly different from an ISA. If you are looking for way to invest in your long term future and want to pay in above the ISA limit, you can begin saving into our bonus plan for as little as £10 a month.

 University savings plan

We also have tax efficient savings plans directly suited to peoples needs. One of these plans is our university savings plan. If you are looking to save for your child to go to university in a tax efficient way, this could be the very plan for you. The plan is specifically designed to save enough to cover the costs of a university education and living expenses, and offers a unique withdrawal process when your child is aged between 18 and 21. If your child decides not to go to university, then the fund can be used to give your child a real head start, by providing them with a tax-free lump sum to get them on their way.

So, Shepherds Friendly Society could be exactly the place you are looking for to help prepare for you and your families future. If you would like any more information on any of our plans please don’t hesitate to call us on 0800 526 249.