Friendly societies in the UK

A Friendly Society is a mutual organisation that is owned by its members. This makes them like building societies, and both are regulated by the Prudential Regulation Authority and The Financial Conduct Authority. The main difference is that Friendly Societies offering insurance products must be registered under The Friendly Societies Act 1992. This status means Friendly Societies can offer unique products such as Tax-Exempt Savings Bonds.

Friendly societies offer savings, investments, insurance, pensions and other retirement products.

A Tax-Exempt Saving Plan is a type of investment fund. You can pay up to £25 per month or £270 per year into the fund over a term of 10 to 25 years. The Friendly Society then invests the pooled money from its members into various investments and this can include stocks and shares. Some Tax-Exempt Savings Plans offer a minimum level of growth and bonuses too. The monthly or annual payments are in addition to your ISA Tax Allowance and the income earned when the Plan matures is also tax-free.

Cash savings accounts do not risk your capital, while a Tax-Exempt Saving Plan is a form of investment and this means the money you may receive back could be less than you invested. Interest earned from a cash savings account may be liable for tax if this exceeds The Personal Savings Allowance while earnings from a Tax-Exempt Savings Plan is tax-free.
Both are protected by the Financial Services Compensation Scheme as long as they are held with a UK authorised bank, building society or friendly society.

Investment bonds from a Friendly Society allow you to invest a lump sum over five years or more. The Friendly Society then manages this money as a pooled fund and invests these into the stock market. Some Friendly Society investment bonds allow you make an annual withdrawal tax-free. Income from the investment bond is free from basic rate income tax and capital gains tax.
As this is an investment you may receive back less than you originally invested.

Some Friendly Societies also offer Lifetime ISAs, Stocks and Shares ISAs and Junior ISAs. Some Friendly Societies also offer the option of an Inherited ISA Allowance.

Income protection can help you if you find you cannot work due to illness or injury. The policy runs until a set end date, sometimes capped by the Friendly Society, for example at the age of 70. Some Friendly Societies offer an enhanced policy where for an addition al premium you can receive a share of the surplus profits of the Friendly Society. This builds into a capital sum you can receive when the policy ends.

Some Friendly Societies also offer over 50s life cover. This provides a guaranteed lump sum for your family after you pass away. You can usually find life insurance cover from a Friendly Society that does not require a medical and with fixed monthly premiums.

Friendly Societies started to emerge during the Industrial Revolution and were officially recognised by the UK Government in 1875. Local groups of people came together to save money collectively that could be used in case of an emergency. Members of the Friendly Society could access money if they feel on hard times, for example if they fell sick, needed to pay for a funeral or to replace livestock or tools.

Shepherds Friendly Society estimates there are around 200 Friendly Societies in the UK.

A Friendly Society invests the funds of its members and manages its insurance funds to generate returns to cover its operating costs, invest in services and to pay bonuses as required to its members. It does not have shareholders so any profits generated are distributed to members or member services.