Friendly Society Policies
Friendly Society Policies offer tax efficient savings plans, although legislation restricts their business
by imposing limits on the size of the contracts they can offer.
The workings of friendly society policies are not relevant to R02, it is just important to know that
funds grow tax free and the return is tax free if taken after at least 7 and a half years.
The only questions that come up in R02 are those on the restrictions of how much can be
contributed to friendly society policies.
The limit for contributions is £270 per annum or, if premiums are paid monthly, the maximum
monthly contribution is £30 (£300 per year).
A person of any age can have a friendly society policy, the same limits apply for all ages.
Questions - Use Your Note Taker To Jot Down Ideas / Calculations
1. The Brown family comprises Mr and Mrs Brown and their two children aged 12 and 4. What is the
MAXIMUM amount that can be paid per year by the family into friendly society policies if the
premium is paid annually?
a) £540.
b) £1,200.
c) £1,080.
d) £600.
C)
Annual contributions of £270 can be paid per person into a friendly society policy regardless of age –
so for a family of £1,080 can be paid into friendly society policies if paid annually.
2. Mr and Mrs Smith have three children aged 17, 10 and 5. What is the MAXIMUM amount that can
be paid per year by the family into friendly society policies if the premium is paid annually?
a) £1,350.
b) £810.
c) £540.
d) £1,500.
A)
The maximum that can be paid into a friendly society policy on an annual basis is £270 per person.
These can be paid for someone of any age. So for the above example – simply multiply £270 by 5 for
the number of people in the family.
- Further Study Text: Pages 269 - 270