Going for growth

As we go through life, there will be periods when we can save or invest, and others where we need to draw on our reserves. The three big events are the first house you own, starting a family, and retirement! Retirement is made all the more complicated in the UK, because the tax system encourages you to take part of your benefits as a lump sum.You need to think about the value of commuting your pension for a lump sum, but the terms now on offer to police officers are pretty fair.

Sometimes, you will have plans to spend your commutation, or to use it to repay a mortgage. But often you will have a tidy sum to invest. The more you have, the more you need to think about security, spreading your risk and tax! And you will always want to ensure that you have a "rainy day fund", so don't lock it all away in a fund you cannot touch for years - or where you incur large penalties if you do.

At metfriendly, we have been offering lump sum investment for over 15 years, and we were in at the start when ISAs came in 10 years ago. We are open to all members of the Police Family, even though our roots are in London. All our savings and investment products are in a fund belonging entirely to our members, who get bonuses based on our profits. Our investments are spread between bonds (mainly UK government), equities, and property. Members' funds are protected by the Financial Services Compensation Scheme - the terms for insurers like us are slightly different to those for banks and building societies - and there is no upper limit.

Our original lump sum product was a "With-Profit Bond" and is still popular today. Every year, we add a bonus to the original sum invested and send out a statement; we also add a final bonus when it is cashed in (after the first 3 years). We can reduce its value if it is cashed in after our fund has made losses, but not on the tenth anniversary - nor on death. We pay tax on our fund, so the profit to you is free of basic rate tax. It doesn't matter if you pay higher rate tax now. What counts is when you cash it in. Although it is designed for the long term, the only penalty for cashing it in early is 1% in the first year.

Our ISA is just like the With-Profit Bond but our fund is free of tax, so we pay higher bonuses and you have no tax to pay. It counts as a "Stocks and Shares ISA". That means you can also have a Cash ISA. You and your partner are each limited to £10,200 in ISAs every tax year, of which no more than £5,100 can go into a Cash ISA. We can accept unlimited amounts by way of transfer from other ISAs, including former TESSAs and PEPs - and we pay a welcome bonus of 1% on all transfers. This has proved very popular since the interest rates on Cash ISAs crashed.

We also have a welcome bonus on lump sum investments of over £25,000 - this sum can be shared with your partner, and can include With-Profit Bonds and ISAs. We offer special terms to enable you to park your money in our With-Profit Bond and transfer it to our ISA in future tax years. See our website for full details.

Tax efficiency is important when you want to make the most of your money. Over the last 10 years, our With-Profit Bond has grown by 76%, but the extra bonus on the ISA has increased that to 85% (figures at 1 July 2010). Past performance is no guide to future returns, but we are proud that we have achieved that return over a period when the FTSE 100 index has fallen! We are also pleased that about a quarter of our return has come from releasing surplus capital to our members, but we do not expect to repeat that.

Long-term insurers like metfriendly have to submit their investment returns for certain savings and investment products to the Financial Services Authority. We are proud of our returns and publish them on our website.

For more information visit:

www.mpfs.org.uk
or "Friendly" on Aware - give details of all our products, and who is eligible to be a member of the Society.

Or give us a call on:

01689 891454 or

Metphone 28192

Stuart Bell
Chief Executive at Metropolitan Police Friendly Society