Questions and Answers

What is an MPFS Children's Savings Plan?

It is a conventional with-profit Tax-Exempt plan, written in the name of the child, with a regular monthly premium payable.

The plan is always written to the anniversary preceeding the child's 25th birthday, but penalty-free surrenders are available on the child's 18th and 21st birthday, as long as the plan has been in force for at least 10 years at that time.

Who can take out a Children's Savings Plan?

The child need not be resident in the UK. To invest with us, the sponsor must work or have worked in the police service - or be the partner or close relative of such a person. If this doesn't apply to you, you can still invest in a Children's Savings Plan with us if the child is closely related to someone who works, or has worked, for the police service.

We also have a Tax-Exempt plan for adults.

Who can pay into a Children's Savings Plan?

Unlike the Child's Trust Fund, it is not possible for several people to pay into the same Children's Plan. However, if the original sponsor is unable to continue the payments for any reason, we would always encourage another person to continue instead (perhaps another relative or even the child if they are 18 or over) rather than let the plan cease and pay out a surrender value.

Can I save on behalf of more than one child?

Yes, you can invest in separate plans for as many children as you like.

How flexible is it?

Because of the tax advantages, once the plan has started you cannot change the amount you pay. However, you can start another plan later provided the total premiums being paid for that child do not exceed £25 per month.

How does the Children's Savings Plan work?

  • You invest a regular monthly premium (maximum £25) with the Society for the child's benefit. The child may take over paying premiums at age 18.
  • Each premium is treated as a "gift" to the child for legal and tax purposes.
  • These are life insurance plans and they have a death benefit, the Sum Assured. (However, under age 10, the death benefit is limited to a return of premiums.)
  • The Sum Assured is based on the premiums you pay and the term - which goes through to the anniversary before the child's 25th birthday.
  • There are options to cash in early .

  • Your money is invested in our with-profits fund.
  • At the end of each calendar year, we add a bonus to the Sum Assured and send you a bonus notice.
  • Once added, that bonus is a permanent addition to the child's investment with us.
  • Bonuses are compounded, so in subsequent years the child earns bonuses on the bonuses.
  • The Sum Assured and bonuses are payable at maturity (or on the child's earlier death after their 10th birthday).
  • We also normally add a final bonus when the benefit is paid.

    • Where is the premium invested?

    The premiums are invested in the Society's with-profits fund which is made up of equities, government bonds, commercial property, corporate bonds and cash. The appropriate "mix" is listed below as at 31st December 2007. For more information on how the with-profits fund works, please refer to the "How we manage the with-profits fund".

    1. Equities 44%
    2. Government Bonds 36%
    3. Commercial Property 8%
    4. Corporate Bonds 7%
    5. Cash 5%

    How are bonuses determined?

    Bonuses are decided by the Board acting on the advice of the with-profits actuary. A key factor in determining bonuses is the investment return in recent years.

    What happens if the stockmarket falls?

    The with profits-fund is invested in a mix of equities, commercial property, UK government bonds, corporate bonds and cash (see list above), and by spreading the fund between the various investments the Society is not dependent on one market. For instance, if the value of the stockmarket were to go down but other investments go up, then the effect would be that one cancels out the other.

    How do I apply for a Children's Savings Plan?

    Please make sure you read this document (Key Features and guide to our with-profits fund) - and fill in an application form for each child. Send it to us with your payment instructions, and a copy of the child's Birth Certificate.

    Serving officers or staff in the Metropolitan and officers in the City of London Police Services can authorise us to take monthly premiums from their salary.

    If you are retired, or a relative, or simply wish to pay by direct debit, please ask for a direct debit form (unless you already pay us this way). if you are not already making payments to the Society, please provide us with a recent utility bill as proof of your address.

    How do I contact you?

    Metropolitan Police Friendly Society Limited,
    Berwick House,
    8-10 Knoll Rise,
    Orpington,
    Kent,
    BR6 0EL,


    Phone: 01689 891454
    Fax: 01689 891455
    Metphone 28192


    Email: enquiries@mpfs.org.uk
    Web: www.mpfs.org.uk.

    What if I change my mind?

    We will send you a certificate of membership and a cancellation notice. If you change your mind, you can return the notice within 30 days for a full refund.

    What might the child get?

    An example - What the child might get after 24 years for a regular monthly premium of £25:

    • If investments grew at 5% a year - they would get back £11,900
    • If investments grew at 7% a year - they would get back £15,600
    • If investments grew at 9% a year - they would get back £20,800

    The early years

    Warning - if they cash in during the early years, they could get back less than you paid in.  The following examples show what they might get back - they assume investments will grow at 7% a year.

    At the end
    of year    		 Total premium
    paid in to date    		 Effect of
    Deductions to date    		 What the child
    might get
    1£300£36£275
    2£600£68£575
    3£900£99£900
    4£1,200£179£1,200
    5£1,500£176£1,610

    The final year

    At the end
    of year    		 Total premium
    paid in to date    		 Effect of
    Deductions to date    		 What the child
    might get
    10£3,000£474£3,810
    15£4,500£964£6,830
    17£5,100£1150£8,420
    20£6,000£1640£11,000
    24£7,200£2380£15,600

    What are the charges?

    • The deductions include the cost of expenses, charges, any surrender penalties and other adjustments.
    • The last line in the table shows that over a 24 year period the effect of the total deductions could amount to £2,380.
    • This would have the same effect as bringing down the investment growth from 7.0% a year to 6.0%.

    How much will it cost for advice?

    • The Society does not make any form of commission or incentive payments
    • The cost of providing verbal or written information about this plan is included in the Society's overall expenses.

    Are there limits on premiums?

    Each child is limited to £25 per month in these plans, and that includes Tax- Exempt plans with other Friendly Societies. This limit applies to the child, not the payer (who can therefore also have a Tax-Exempt plans as an adult in their own name - see our Savers Tax-Exempt Plans for details).

    Can I choose how long to save for?

    No; the child has to be under age 15 at outset, and the term will be set so that the plan matures before age 25. However, the plan can be cashed in early see 'Can the plan be cashed in before the end of the term'.

    What about tax?

    There is no liability for Income or Capital Gains Tax on the payout at the end of the plan, nor on the child's earlier death, nor if the plan is cashed-in after the first 10 years.

    How will I know how my plan is doing?

    We will send you a bonus notice every year, showing you the annual bonuses that have been earned; any final bonus (payable on encashment) will not be shown. Please refer to the "How we manage the with-profits fund".

    Can the child leave their money with you at the end of the term?

    The plan must pay out at maturity (the anniversary before the child's 25th birthday) and cannot be left to grow. Although the child will have the option of reinvesting the proceeds in one of the Society's lump sum investment products.

    Can the plan be cashed in before the end of the term?

    Plans can be cashed in for a surrender value. A plan can only be cashed-in completely - we will not permit part surrenders.

    Once you have been paying premiums for 5 years, the surrender value will usually exceed what you have paid in - but it could be less in the early years. The surrender value reflects our investment return over the period of the savings.

    There is the option to mature the plan penalty-free on the child's 18th or 21st birthday, provided the plan has been running for 10 years. The Sum Assured and annual bonuses will reflect the actual period for which premiums have been paid. The final bonus is at the rate applicable to maturing policies at the previous policy anniversary.

    Who can cash-in the plan?

    If the the child is under 16, the sponsor can request the plan be cashed-in, but once the child is 16 or over only he or she can make such a request.

    If the child is 16 or older, we will pay the surrender value directly to them. If he or she is under 16, we can pay either to the child or to a parent or legal guardian on the child's behalf.

    Will the tax benefits be lost?

    If it is cashed-in after 10 years (or 3/4 of the original term if shorter), there is no personal tax liability. However, if it is cashed-in earlier, income tax may be payable on the amount by which the cash-in value exceeds the total premiums paid. Tax would be payable at the child's highest rate of income tax - and if the child does not have sufficient income to pay tax, then no tax is payable.

    What happens if I (the premium payer) die?

    The plan can continue as planned if a replacement sponsor can be found to continue the regular payments. Another relative, or even the child (if over 18) could volunteer; however if no one is prepared to pay the remaining premiums, then the policy will cease and a surrender value will be paid to the child or his/her parents or legal guardians on his/her behalf.

    What happens if the child dies?

    The plan will immediately cease and Sum Assured and bonuses to date will be paid to the child's legal personal representatives (usually the parents). However, if the child was under 10, the death benefit is limited (by law) to the amount of the total premiums paid.

    Is it suitable for us?

    If you are unsure as to the suitability of this products, and wish to obtain personal advice, you should contact an independent financial adviser.

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