An unfriendly savings bond

“Tax-free and Friendly Bond” says the heading for this Scottish Friendly product and “Invest from 25p a day and you could look forward to better things”.  Sounds nice doesn’t it? Looking further down the page they proudly announce “No profits are paid to city shareholders meaning they can be reinvested for the benefit of Scottish Friendly customers”, which in this age of distrust of bankers sounds like good news.

But the details of the bond show a different picture; not so much friendly as gruesome. Look at the “How could the charges affect my investment” table on page 4. That shows the following potential returns for a £25 a month investment (which is the maximum tax free amount you can invest with a Friendly Society) :

paid in  charges return
2 year 600 336 271
5 year  1,500 391 1,220
10 year 3,000 504 3,100

Not very friendly, is it? After 10 years, you will have made just £100, that’s less than 1% pa. If you take your money out any earlier, you will get less. (Unless you die – there is a tiny amount of life assurance included in the product, so that if you die your heirs will get back the full amount you paid in.)

That projected return assumes they average a 4.5% investment return. So perhaps you might hope that the clever people will make more than that for you – but they are only allowed to invest 40% of the money in risky things like shares and property, 60% has to be invested very safe investments such as Gilts and with those conditions they are frankly going to be doing very well if they get a 4.5% return.

The amount you might get is so low partly because of the restrictions on the investments, but also because of the charges. Scottish Friendly may not have any City shareholders, but it is paying commission to Phoenix who do. And because the charges are so high at the start it takes a long while for the value of the bond to recover – nearly 10 years in fact!

There is a featured customer review saying “I heard a lot about Scottish Friendly – it was all praise, so I decided to start investing with you.” I really hope any potential savers looking at this product pay absolutely no attention to that and instead look at the details.

They would do better to put their money into an ISA – that is tax free, they won’t lose any money if they have to take it out before 10 years, or if they die,  and even at today’s very low savings rates, they will be able to do better than with this unfriendly bond.

I think the web page is misleading. I will be putting in a complaint to the new Financial Conduct Authority and it will be interesting to see what response I get.


  1. Deedoodah says:

    That’s crazy, how do they get away with it?!

    Never been here before, came through the link today. Hoping for lots more to come! I always eat when I have money troubles (or successes thinking about it now!) Clever concept.

  2. Catherine says:

    This is absolutely true I’ve just got a Bond paid out and I got £300 for an investment of over £2000 over 13 years. They are not in the least concerned and refer you to the Ombudsman but I want to know who are the investors in this company as they should be sacked.

  3. I agree with the other reviews. However I have had to do an early surrender due to a family emergency. Well it is the most painful process I have ever encountered. In this day and age, Scottish Friendly do not accept emails or scan copies. They want all documents original to be sent by post.

    They do not do bank transfer but sends out a cheque, which take 5 working days to clear. The staff is most unhelpful, and can never give you a date or status of the surrender , unless it has passed over 10 days from posting. All in all it takes about a month before you can even have a cheque and may be up to 40 working days for your money.

    Definitely I will not be taking out another Scottish Friendly investment.

    • Hello. I have a Scottish Friendly policy that I’ve not made a payment to since 20 Jun 13. I phoned them up and they told me that all the money was lost but I could pay the outstanding monthly amount to catch up. I said I would take it under consideration. I’ve now had a chance to investigate this further, and it states that if I catchup all missed payments within 12 months all is fine, HOWEVER! I’ve only just seen this ability to do an early surrender. Can anyone give me more info on this? I imagine Scottish Friendly will try to take a big chunk of fee’s from me etc. Anyone have any further information before I contact htem?

  4. Kenny Macdonald says:

    looks like Scottish friendly have stopped selling these products and switched to ISAs. Sounds like they’ve taken your advice!

  5. Robert Dickie says:

    I have the same issue
    You are misled into taking this policy with advertising hype, a promise of a £10 M&S voucher
    But once you commit the policy is setup to ensure that Scottish Friendly
    get all their fees up front and the returns well these are non existent!
    watch out for the service charges too
    Its a unfriendly policy
    Here we ago again this happened many years ago and the government does nothing
    set an example and force them to repay all the customers 🙂
    or its PPI all over again.

  6. sue williams says:

    Just had a Scottish friendly payout invested 25 pounds over a 10 year period which was 3000 and received 109 pounds profit not even 10 per year what a con would have done better putting in ordinary building society avoid at all costs

  7. Richard Warne says:

    My 10 year £25 savings bond with Scottish Friendly matured in December 16. Since then I have been foolishly waiting for a cheque. In fact Scottish Friendly have not contacted me at all. After chasing them in January, apparently I have to fill in a “claims form”. I have now chased them repeatedly and still no money, I cant even get the elusive claim form out of them! ( how hard can it be to email or send a form?). I am starting to wonder if it is a scam? I wonder how many peoples money they are sat on through not contacting or sending the customers money on maturity of their plans? Surely this should not be allowed.

    • Anne Miller says:

      did you get any satisfaction in the end: am still waiting for my claims form so will need to get hold of one of these so any advice would be gladly received!


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