24 September 2021
A quick guide to the Regular Savings Plan
Most of our clients who want to save regularly tend to opt for the Tax Exempt Savings Plan (TESP) as their first port of call, to maximise their tax-free allowances. However, you can only save £25 per month / £270 per year in a TESP so anyone who wishes to save over this amount should then consider our complimentary Regular Savings Plan.
The Regular Savings Plan (RSP) can be set up on its own or to run alongside the TESP. You can start saving from as little as £5 per month or £50 annually and it works very similarly to the Tax-Exempt Savings Plan, apart from the fact that the Society has to pay tax at the basic rate on the Regular Savings Plan. To reflect this, the bonuses are set slightly lower than with the TESP.
The RSP has a guaranteed final amount for more than you will pay in, so for example:- If you open a plan of £50 per month over 15 years you will pay in £9,000. This plan guarantees you a minimum return of at least £9,805 on maturity… here is where it gets interesting…
We aim to add bonuses each year based on your guaranteed final amount – not on what you have paid in. If you had invested your monies in a normal bank account you would be merely earning interest on the amount you have paid in to date. Bonuses are calculated based on the performance of our with-profits fund and whilst these are not guaranteed, the Society has declared bonuses for every year these plans have been available. The current rate for our new issue RSP is 0.5%, so based on the above you could receive over £49 in the first year as a bonus, yet you will only have paid in £600.
Some clients like to open a new policy each year, that way, once their first policy comes to maturity, they can expect a maturity payout each year in the future.
Anyone can have a RSP – indeed we have clients of all ages with this type of plan, mums, dads, grandparents and children, in fact this is a very popular plan for grandparents who often open the plans for their grandchildren and great-grandchildren in some cases!
If you surrender the plan before maturity (which is the term you select when first starting the plan), you may get back less than you have 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.
You can find further information here, or you can contact us and we’ll post the information out. All our staff are fully trained and if your query is in office hours our friendly staff will be happy to help either via our on-line chat facility or over the phone on 01226 741 000. We cannot give financial advice, if you require advice you should contact a Financial Adviser, which may incur a fee.
This blog provides generic information and opinions of the writer and should not be relied upon for making investment decisions. No advice has been provided by Sheffield Mutual. If you are in any doubt as to whether a savings or investment plan is suitable for you, you should 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.