Tax Exempt Savings Plans
In addition to your annual Individual Savings Account (ISA) allowance, you can save up to a further £25 per month tax-free in a Tax-Exempt Savings Plan offered by Friendly Societies. As they can be used alongside an ISA, Tax Exempt Savings Plans are a good way of maximising your savings by taking advantage of your tax free allowance.
Tax advantages
Tax Exempt Savings Plans offer unique tax advantages, and are often considered well-suited for smaller savers who wish to invest with relatively lower risk, especially to build up a nest egg for children. At present, anyone may contribute up to £25 a month (or £270 a year) in a Tax Exempt Savings Plan, and receive the lump sum at the end of the term free from Capital Gains and Income Tax, provided the term runs for a minimum of 10 years.
Flexible investment
While most other tax-efficient investments don't allow such small monthly premiums, some Friendly Societies allow you to invest as little as £10 each month, and typically offer the option of choosing your premium up to £25. In addition, many providers allow you to choose your term from a minimum of 10 years to a maximum of 25 years.
Stock-market based investment
Because Tax Exempt Savings Plans are stock-market based, they are not suitable for short-term saving, as a longer term will allow you to ride out any declines in the market. With Profits policies such as Foresters Friendly Society's Tax Exempt Savings Plan have tended to be less affected by recent drops in the stock market than Unit-Linked plans, owing to a mechanism which moves funds from equities to gifts as the plans reach maturity.
Benefits
In addition to the tax advantage, Friendly Societies often offer a range of social and protection benefits at no extra cost. Foresters grant you automatic access to Foresters Membership benefits, including discounted will writing services, support with illness and disability, convalescent homes, discretionary grants and more. Make sure you are fully aware and take advantage of the benefits your provider may offer when you take out a savings plan.
As is always the case when choosing to invest your money long-term, if you are unsure about the suitability of a Tax Exempt Savings Plan it is best to seek advice from an Independent Financial Adviser.
