Questions and Answers

What are MPFS Long Term Savings Plans?

They are tax-efficient savings plans for regular savings, designed to shield your savings from higher rate tax.

Who can take out an MPFS Long Term Savings Plan?

To invest with us you must be 18 or over and work or have worked in the police service in London - or be the partner or close relative of such a person. Both plans have to be taken out before age 50 (55 for non-smokers), although you can still take out a Whole Life Plan up to age 60 (65 for non-smokers) for a reduced Sum Assured (see 'Can I choose how long to save for?').

How flexible are they?

Once the plan has started, the premium and term are fixed and cannot be altered. However, if you stop paying the premium the plan will cease and a 'surrender value' will become payable.

When can I take money out?

When the Endowment Plan reaches the end of its chosen term you will receive the maturity value. Under the Whole Life Plan premiums cease after 10 years, and you are given the option to take the maturity value at that point or leave the money invested to grow. You can then request a 'surrender value' when you choose, as below.

If necessary, you can cash-in either plan at any time for a 'surrender value'. You can only cash in a plan completely - we will not permit part surrenders. We need to allow for investment performance, so any illustrated surrender values are not guaranteed.

On taking money out of either plan there may be tax implications - (see will I lose my tax benefits).

On taking money out of either plan there may be tax implications.

How do I withdraw money when I need it?

All you have to do is send or fax us a signed letter detailing your request and giving details of the bank or building society account where we should pay your money. Requests received by Friday are normally credited to your account the following Wednesday. Where there is an intervening public holiday, different arrangements apply. Please contact us for more details.

How do the MPFS Long Term Savings Plans work?

• You invest a regular monthly premium with the Society.
• These are life insurance plans and they have a death benefit, the Sum Assured (which has to meet the requirement of tax legislation).
• The Sum Assured is based on the premiums you pay and the term you choose.
• Your money is invested in our withprofits fund.
• At the end of each calendar year, we add a bonus to the Sum Assured and sendyou a bonus notice.
• Once added, that bonus is a permanent addition to your investment with us.
• Bonuses are compounded, so in subsequent years you earn bonuses on the bonuses.
• The Sum Assured and bonuses are payable at maturity or earlier death.
• The Endowment Plan can have any term between 10 and 35 years fixed at outset (depending on your age).
• The Whole Life Plan has a premium payment term of 10 years. On the tenth anniversary you have the option to take the maturity value or leave the accumulated funds invested with the Society where it will to continue to attract bonuses.
• We also normally add a final bonus when the benefit is paid.

Where is my 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 diagram 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 MPFS Long Term Savings Plan?

Please make sure you all the details about these plans - and fill in the appropriate application form (Form A - for Police Officers or Police Staff, Form B - for partners or relatives) remembering to conplete the appropriate box for the plan you require. For new members Form B should be accompanied by reasonable proof of identity (copy of your Birth Certificate, Driving Licence or Passport) and of address (copy of a recent utility bill). Send it to us with your payment instructions.

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 - both for their plan and that of their partner.

Any amount subscribed in this way for a partner will be for their benefit. Any partner's policy paid for in this way still legally belongs to that partner. It will be their tax status on encashment that determines whether there is any tax to pay at that time, and any payments will be made to them.

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 this way).

What happens to my plan if I die?

The value of your plan including any bonuses added will be payable to your estate. This sum will not be less than the Sum Assured.

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 I get back?

An example - What you might get back after 10 years for a monthly premium of £50

• If investments grew at 4% a year - you would get back £6,840
• If investments grew at 6% a year - you would get back £7,580
• If investments grew at 8% a year - you would get back £8,410

The early years

Warning - if you cash in during the early years, you could get back less than you paid in.  The following examples show what you might get back - they assume investments will grow at 6% a year.

At the end of year	Total premium paid in to date	Effect of deductions to date	What you might get back
1	£600	£68	£550
2	£1,200	£124	£1,150
3	£1,800	£168	£1,800
4	£2,400	£304	£2,400
5	£3,000	£270	£3,210

The final year

At the end of year	Total premium paid in to date	Effect of deductions to date	What you might get back
10	£6,000	£558	£7,580

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 ten year period the effect of the total deductions could amount to £558.
• This would have the same effect as bringing down the investment growth from 6.0% a year to 4.7%.

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 these plans is included in the Society's overall expenses.

Are there limits on premiums?

There is normally no limit - but we must be able to underwrite the life insurance cover, so we may exceptionally impose one.

Can I choose how long to save for?

The Endowment Plan can have any term between 10 and 35 years, but has to mature before age 60 (65 for non-smokers). We illustrate a term of 10 years in this brochure, but will provide you with a personal illustration based on the term you prefer (and on the premiums you select).

You can only contribute to a Whole Life Plan for 10 years, but your accumulated investment can remain invested for as long as you wish. Additionally, the Whole Life Plan has to be taken out before age 50 (55 for non-smokers) to secure the illustrated Sum Assured, but you can still take out a plan up to age 60 (65 for non-smokers) for a reduced Sum Assured - about 5% lower than illustrated. Again you will receive a personal illustration that reflects your own circumstances.

What about tax?

There is no liability for Income or Capital Gains Tax at the chosen maturity date or on earlier death. However, there will be a liability for tax on early surrender if you are a higher rate (40%) taxpayer at that time. Currently this amounts to 20% of the profit you make - there is no liability if you are a basic rate or a non-taxpayer. This tax charge only applies in the first 10 years.

How will I know how well 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.

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.

Can I leave my money with you at the end of the term?

The whole life plan has a premium term of 10 years and is the more flexible way of saving for this term, as you can choose to cash it in after 10 years or let it continue to attract bonuses - at a higher rate. Endowment plans pay out on the chosen date, but cannot be left to grow. Although you will have the option of reinvesting the proceeds in one of the Society's lump sum investment products.

Can I cash in before the end of the term?

Contracts can be cashed in for a surrender value. You can only cash in a plan completely - we will not permit part surrenders. Where you are investing more than £50 per month we recommend you split your plan into 2 or more - which gives you more freedom if you need to cash in early.

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 your savings. Normally, it will only be slightly less than if you had originally chosen an endowment plan for the actual term to the date of surrender - the difference reflecting our costs including the life cover you will have enjoyed.

Will I lose my tax benefits?

There may be a liability to tax on early surrenders - currently this is 20% of the profit you make, but only for higher rate taxpayers. This tax charge only applies in the first 10 years (actually only 7 1/2 years in the case of a 10 year endowment plan).

Is it suitable for me?

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