A quick guide to the Regular Savings Plan

An Introduction to Our Regular Savings Plan

In this quick guide to the Regular Savings Plan, we’ll be covering the following topics:

• What Is a Regular Savings Plan?

• Sheffield Mutual’s Regular Savings Plan

• Who Can Open a Regular Savings Plan?

• Should I Open a Regular Savings Plan or Tax Exempt Savings Plan?

• Potential Risks to Consider

Please note: This article offers a simple overview of our Regular Savings Plan. To stay fully informed about all terms and conditions, we recommend that you read our Key Information and Important Information Documents before applying for a plan. 

What Is a Regular Savings Plan?

A Regular Savings Plan (RSP) allows you to consistently save monthly or annual amounts over the medium to long term. It has the potential for better returns than a cash savings account, but you’ll need to be committed to putting aside payments for a set amount of time. Therefore, a Regular Savings Plan usually isn't the best place to store emergency funds or money you will need access to quickly. 

This plan could be a good way to get into the habit of saving to build up a substantial sum of money, whether for a special event, a monetary gift for a loved one, or simply to provide extra financial security for your future self!

Sheffield Mutual’s Regular Savings Plan:

With a Sheffield Mutual Regular Savings Plan, you can select how much you’re comfortable with saving and for how long. We offer affordable options starting at £5 a month or £50 annually, with terms ranging from 10 to 25 years. As long as you keep up with all payments until the plan matures, we guarantee a minimum final amount (sum assured) for more than you have paid, plus potential annual and final bonuses (Please note that bonuses are not guaranteed). 

How do we achieve this?

The Society invests in diverse assets to provide higher returns in the medium to long term than what may be achievable with a typical bank or building society. We also aim to add yearly bonuses based on your guaranteed final amount – not on what you have contributed. This approach differs from investing in a standard bank account, where you would only earn interest on the amount deposited.

We calculate our bonuses according to the performance of our with-profits fund. While not guaranteed, the Society has declared bonuses for every year these plans have been available. We also use a method called ‘smoothing’, where we hold back some surplus profit in strong years to boost returns in years when investment performance is less positive. This approach helps to even out the short-term fluctuations often associated with investing, enabling the Society to maintain stable bonus rates even in volatile markets.

Our Regular Savings plan at a glance:

• Begin regularly saving from affordable amounts of £5 monthly or £50 annually.

• Select a medium to long investment term that suits you (10 to 25 years).

• Receive a guaranteed lump sum on maturity, provided you pay all premiums.

• Potentially receive annual and final bonuses based on performance. For example...

£25 per month for 10 years is £3,005 sum assured.

If the current bonus rate was 2.25% we would pay 2.25% on £3,005 = £67.61 x 10 (assuming the rate stays the same) = £676.12 over the term of the policy. 

Bonuses are not guaranteed. Past performance isn't an indication of future performance.

• Your money is invested in our managed with-profits fund, which aims to offer higher potential returns than a typical bank or building society.

• Experience ‘smoothing’ over the life of the policy (we retain some of the investment return in good years to help maintain bonus rates in less positive years).

• You cannot make withdrawals, but you can surrender your plan. However, the surrender value may be less than what you paid.

Who Can Open a Regular Savings Plan?

Anyone of any age can open a Regular Savings Plan - and there’s no limit to how many you can have. Some clients prefer to open a new policy each year. Once their first plan comes to maturity, they can look forward to a maturity payout each following year.

You can even open a Children’s Regular Savings Plan to invest in a child’s future. This option is especially popular with grandparents, who are often eager to open plans for their grandchildren (and sometimes great-grandchildren) to contribute to future milestones like buying a first car or putting towards a house deposit. 

Should I Open a Regular Savings Plan or Tax Exempt Savings Plan?

Many clients who want to save regularly opt for the Tax Exempt Savings Plan (TESP) first to maximise their tax-free allowances. If you haven’t taken advantage of our exclusive Friendly Society plan yet, it might be worth considering the TESP before exploring other options. 

A TESP limits contributions to £25 per month or £270 per year. To save beyond this amount, you may wish to complement it with a Regular Savings Plan. Although the RSP does not have a tax-free benefit, it can help you build a substantial lump sum over the years. 

The good news is you don’t have to choose one plan over another. The RSP can be set up independently or run alongside the TESP. Both policies work similarly, but the Society pays tax at the basic rate on the RSP, which means the bonuses are slightly lower than those with the TESP.

Potential risks to consider:

Like any investment, remember that capital is at risk. You should also evaluate the following risks before opening a Regular Savings Plan:

• You cannot withdraw, so only invest money you do not need to access. If your circumstances change, please contact us to discuss your options before surrendering your plan.

• If you surrender the plan before maturity, you may get back less than you paid in.

• Tax treatment depends on individual circumstances and may be subject to change in the future.

• Bonuses are not guaranteed to be paid and depend on the performance of the Society's with-profits fund.

Start Contributing to a Regular Savings Plan Today

Ready to commence your new savings journey? Ensure you have understood the Regular Savings Plan Product and Key Information, decide how much and for how long you wish to save, and then proceed to the application. Depending on your preference, you can apply online, by phone or by post. 

If you have further questions about our Regular Savings Plan, please contact our friendly team today. Although we cannot offer financial advice or make personal recommendations, we’re happy to share factual information about our products and services. Please note that all details in this article are correct at the time of publication. 

This blog provides generic information and the writer's opinions and should not be relied upon for investment decisions. Sheffield Mutual has provided no advice. If you doubt whether a savings or investment plan suits you, consider contacting a financial adviser for advice. If you do not have a financial adviser, you can get details of local financial advisers by visiting www.unbiased.co.uk or www.vouchedfor.co.uk. Advisers may charge for providing such advice and should confirm any costs beforehand.