The insurance business - More on Friendly societies

The particular attraction of friendly societies is that they can issue tax-exempt life assurance endowment policies. There are, however, certain limits. Policies can only be for sums assured up to £20,000 and must be held for a minimum period of ten years to qualify for the tax exemption.

The premiums, to an annual maximum of £416, must be of equal amounts throughout the period, payable either yearly or more frequently.

There is a further limitation. Friendly society policies are not available to single people unless they have dependent children. Husband and wife can each take out one policy only for the others benefit or for their dependent children.

Although policies must be written for the benefit of the dependent child or the spouse, the policyholder can surrender the policy at any time for (usually) his or her own benefit.

In such cases, the amount paid out on surrender before ten years is up must not be more than the gross premiums paid before 15 %tax relief.

Where the surrender value is higher than that, the extra must be held in the friendly society until the tenth year is up.

On maturity only the named beneficiary, not the policyholder, can collect the benefits. Despite these restrictions, policies from friendly societies are a useful addition to life assurance, because they carry not only the benefits of tax relief on the premiums, but the freedom from tax on the investments and therefore the possibility of higher profits to members. The premiums are then invested in totally tax-exempt unit-linked or building society-linked investment funds. In contrast, insurance companies pay taxes on their profits, so the policies issued by friendly societies are highly tax-efficient.


Friendly Societies in 2012

Payroll Giving
It’s all very easy to organise.
Just ask the Personnel or the Payroll Department at your company and, if they already have a scheme, they will give you the relevant forms.  HM Revenue & Customs’ website has a list of Payroll Giving agencies and explains payroll giving in more detail.

Salon Gold Insurance

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read on: Lloyds of London

The particular attraction of friendly societies is that they can issue tax-exempt life assurance endowment policies. There are, however, certain limits. Policies can only be for sums assured up to £20,000 and must be held for a minimum period of ten years to qualify for the tax exemption.

The premiums, to an annual maximum of £416, must be of equal amounts throughout the period, payable either yearly or more frequently.

There is a further limitation. Friendly society policies are not available to single people unless they have dependent children. Husband and wife can each take... see: Lloyds of London