Tax Exempt Savings Plan

for adults and children, only available through friendly societies

Tax Exempt Savings Plan

Tax Exempt Savings Plan

The Tax Exempt Savings Plan could be the perfect way to save for something special, increase your retirement fund, save for your children’s university fees or build up a house deposit.

Why choose this plan?

  • Only available from friendly societies and in addition to your ISA/JISA allowance

  • Save from £5 to £25 per month or between £50 and £270 per annum tax-free*

  • Decide how long to save for, between 10 and 25 years

  • Receive a guaranteed tax-free* final amount on maturity plus possible bonuses

  • Available to adults and children from birth (parents and grandparents can run the plan)

  • Please be aware that a surrender penalty will apply if cashed in before maturity

  • If you want life cover included see our Tax Exempt Savings Plan with Life Assurance

Please read the product Q&As and Key Features document before proceeding.

How much can I save in a tax exempt plan?

Under current legislation, the maximum individual investment in a tax exempt savings plan is £25 per month or £270 annually. The minimum you can save in the Sheffield Mutual plan is as little as £5 per month or £50 annually. If you would like to save more than £25 per month, please ask us for details of our Regular Savings Plan or Investment ISA. It is also a "qualifying life policy" with a special tax status and you cannot pay in more than a total of £3,600 in a 12 month period into qualifying policies with Sheffield Mutual or any other life company or friendly society (excluding pure protection policies and protected qualifying policies issued before 21 March 2012). Please contact us if you need help or guidance in relation to the qualifying policy rules or view our guide.

Who can save in a tax exempt plan?

Anyone can start a plan or have several plans within the overall maximum levels of £25 per month or £270 annually. The maximum figure includes any tax-exempt savings plans held with another Friendly Society, but is in addition to your ISA/JISA allowance.

Can I have a plan for a child?

Yes, even though a child may not have their own income, an adult can pay the subscription on their behalf. This is an ideal way to build up a lump sum perhaps as an 18th birthday gift or to help with school or university fees.

Why should I save with the Sheffield Mutual?

As a mutual friendly society with no shareholders to satisfy, we are able to offer special plans that allow you to invest in these tax-exempt funds and receive tax-free returns on maturity.* We specialise in offering with-profits policies, which offer greater potential returns by investing in a range of different assets – without exposing your capital directly to the stock market. 

Where will my money be invested?

The Society invests in a range of different assets with the aim of providing a higher return in the medium to long-term than is achievable with a bank or building society account. Sheffield Mutual's with-profits fund is managed to provide a low to medium risk investment, appealing to individuals with a more cautious approach to investment. 

The types of assets we invest in are: 

  • The shares of UK companies, though we may also have a very small exposure to some overseas companies and emerging markets to provide diversity. These provide income from dividends with the possibility of capital growth.
  • Investments such as Government Gilts or Corporate Bonds, which provide fixed interest.
  • Property – the Society owns properties which provide income from rentals and potential capital growth. We may also invest in property and infrastructure funds to provide diversity.
  • Fixed interest returns from a small portfolio of commercial mortgages.
  • Cash.

The proportion held in each of these will vary depending on market conditions. We can provide you with a guide to the spread of investments. We seek to adopt an ethical approach to investing and it is our policy not to invest knowingly or directly in industries relating to armaments, tobacco, gambling or pornography.

How are bonuses calculated and paid?

We invest our funds as described above and receive a return on those investments, which can vary from year to year. At the end of March or early April we review the returns achieved during the previous calendar year in consultation with our Actuary. The Committee of Management then declares a bonus rate for each policy type for that period. Obviously, the rate varies depending upon overall investment returns and is not therefore guaranteed to be paid at the same rate, or at all, in future years. However, once bonuses have been added to your policy they will not be taken away, providing the policy runs to maturity.

Bonuses are calculated at the appropriate rate based on the ‘sum assured’ (your guaranteed final amount), not the amount of premium paid. On maturity you will receive the sum assured plus bonuses added during the life of the policy. 

The Society also tries to ‘smooth’ returns over the life of the policy by retaining some of the investment return in good years to maintain bonus rates in poorer years. However, to ensure you receive your fair share of returns on your policy over its lifetime, an additional terminal (final) bonus may be paid on maturity. Payment of this type of bonus depends entirely on investment performance and the rate at which annual bonuses have been added. It is not guaranteed and, if paid, the rate may vary from year to year.

Are there any guarantees?

Providing the plan runs to its planned maturity date, the Society will, depending on the amount you wish to save and for how long, guarantee a minimum sum assured (final amount) for more than you have paid in. The final value of your plan will depend upon investment performance, but bonuses are declared by the Society’s Committee of Management each year, and these are added to your guaranteed sum assured. Once added, these bonuses cannot be taken away. 

Can I select the term of my savings plan?

Yes, you may choose the period over which you would like to save, with a minimum term of 10 years and a maximum of 25 years.

Can I make early withdrawals?

You cannot make any withdrawals, but if your circumstances change, you can surrender your policy. However, the plan is designed for medium to long-term investment and the surrender value may be less than the amount you have paid in. You may also be liable for additional tax on any investment gain. The amount of the gain may result in a reduction in the amount of any old-age relief or child tax credit being received.

What happens if I die before the maturity date?

In the event of death before the end of the term, the Society will refund all premiums paid plus interest up to the date of death. Interest is calculated using the Bank of England base rates that have applied during the term of the policy + 1%, though this could be changed in the future by the Society. Notice of any change will be given.

Is life cover included?

No, this plan does not include any life cover. However, we do offer plans that include life cover, which we will be pleased to provide information about.

Are there any charges?

Yes, the Society takes a management contribution of 50% of premiums paid in year 1 and in the second and subsequent years 7.5% of the annual premium amount. These are to cover the cost of expenses incurred in setting up the policy and maintaining it thereafter. The charges are deducted from the overall fund and taken into account when we calculate the level of bonuses we are able to pay.

What about membership? 

Yes, you will become a voting member of the Society (adult policyholders only) with access to various discretionary benefits when available, such as optical/dental grants.

How do I start my plan?

Simply click on the “Get A Quote / Apply Now” button where you will have the option to:-

  • Get a quote on-line
  • Apply on-line or
  • Download an Application Pack
  • View/Download/Print the Product Brochure and Key Features or after 31 December 2017 the key information document

If you choose to apply on-line, this will be submitted to the office where we will check and print out your application and then post it out to you to sign and return.

If you choose to complete a paper application please follow the checklist provided in the application pack and send your application to :-

Sheffield Mutual Friendly Society, FREEPOST RLUC–XKZE–RJAT, 3 Maple Park, Tankersley, Barnsley, South Yorkshire S75 3DP along with a cheque for the initial premium made payable to "Sheffield Mutual" (where applicable). 

Where can I get further help or information?

Our friendly and knowledgeable staff would be happy to provide you with factual information about the Society’s products and services, so you can make your own decision about how to proceed. No advice or recommendations will be given and if you are in any doubt about the suitability of a product, you should seek advice from a suitably qualified financial adviser, which may incur a fee.

Do I need to provide any additional information?

To comply with regulations, the Society will require confirmation of your identification and address. We’ll aim to do this using an electronic verification system, but reserve the right to ask for appropriate documentation from you, if this is not possible. We don’t normally require identity documents from existing members. If the policy is for a child we'll need a copy of their birth certificate. This must be independently certified if saving more than £50 per month.

* All references to taxation are based on the Society’s understanding of current tax legislation and practice, which may change in the future.

The application process should typically take around 10 mins

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