Standard Life Savings Policy

[eamonn]

I have a Standard Life Savings Policy maturing in April 2008. It will be worth 8,500. I have contributed 63 Euros per month over the past 10 years making total contributions of 7,560. I rang them and a lady on the phone confirmed my total inoput was 7560 over the 10 years but after "tax" my contributions was approximately 7,200. Surely this policy shoud not be taxed, is this a regular administration fee. Basically 7,200 matured to 8,600, a 18% increase. I am a financial green horn, I took out this policy when I was 26. Has this been a good return over 10 years when things like inflation are taken into account. Alos I now have to decide if iwant to keep up this policy for another 10 years. I am think of kickstarting a pension policy by putting this lump sum into it. Any advice would be greatly appreciated.

 

[LDFerguson]

It sounds like the lady you spoke to was wrong. You started the policy in 1998 when all such savings policies were taxed internally on profits. So if you put in €7,560, you put in €7,560. The maturity value you quote should be the amount you receive, as tax has already been deducted internally from the fund.

I've no idea where she was getting a tax of €360 on your contributions.

 

[ClubMan]

Did she actually say "tax"? Perhaps she said or meant "charges"? €360 is (perhaps coincidentally?) close to 5% of €7,560 so perhaps there is a 5% per contribution charge or something? Do you know if this or other charges apply? What sort of product is this - the original policy documentation should give some info. 18% return over 10 years doesn't sound great although this figure does not tell the full story since the money has been drip fed in on a monthly basis over that period.

 

[LDFerguson]

18% return over 10 years doesn't sound great although this figure does not tell the full story since the money has been drip fed in on a monthly basis over that period.

There were a lot of Standard Life with-profit savings policies started in 1998 on the back of demutualisation rumours which subsequently turned out to be true. If this is one of them, then presumably Eamonn received his compliment of free shares also.

On the other hand, maturity values on such 10-year With Profit policies aren't that impressive these days. Niall Brady wrote an article on this a few weeks ago, but I can't locate it on the Sunday Times website.

 

[eamonn]

Yes I received shares. Would you advise to keep contributing to the policy for anothe 10 years or else either put the money into a pension policy which I do not have or put it against my house mortgage. What woukld be the best financial decision in the long run.

 

[ClubMan]

There were a lot of Standard Life with-profit savings policies started in 1998 on the back of demutualisation rumours which subsequently turned out to be true. If this is one of them, then presumably Eamonn received his compliment of free shares also.

Ah - good point. Didn't think of that...

 

[LDFerguson]

Yes I received shares. Would you advise to keep contributing to the policy for anothe 10 years or else either put the money into a pension policy which I do not have or put it against my house mortgage. What woukld be the best financial decision in the long run.

I can't offer full advice on that without knowing an awful lot more about your financial circumstances, tax rate, attitude to risk when investing etc. But in many cases, the tax reliefs available on pensions make them more attractive than other forms of long-term saving.

 

[eamonn]

Our position is financially secure. Combined we earn approximately 85K gross. We are both on high tax rate. Mortgage is approximately 26% of our combined take home pay per month. This 8,400 is flexible and my attitude to risk would be neither strongly for or against, middle of the road would be a fair assessment. Would be willing to split it into high and low risk categories.