COMPASS FRIENDLY SOCIETY DIRECT

Authorised and Regulated by the Financial Services Authority

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This page explains the Compass Savings Plan in more detail.

Please read it carefully.

To proceed to the application form, please acknowledge below that you have read this document.

Its Aims

*  To enable you to save regularly in the Society's tax-exempt fund.

*  To provide you with a tax-free lump sum payable at the end of a selected term of years.

*  To provide you with guaranteed life cover.

Your Commitment

*  You agree to pay regular monthly or yearly premiums for a minimum of 10 years.

Risk Factors

*  The Bond proceeds at the end of the premium paying term or on encashment at any other stage cannot be guaranteed as the return depends on the performance of the underlying investments. The value of the savings Plan can fall as well as rise.

*  The expense deductions may be higher than expected.

*  Your circumstances may change and you may have to stop paying premiums. If the Savings Plan is encashed within the first few years it is unlikely to pay back as much as you have put in.

An Example

An adult, currently aged 30, saving £25 per month for 15 years.

What might you get back at the end of the Savings Plan term?

If investments grew at 5% a year, you would receive £5300

If investments grew at 7% a year, you would receive £6180

If investments grew at 9% a year, you would receive £7230

*  These figures are only examples and are not guaranteed - they are not minimum or maximum amounts. What you will get back depends on how the investments grow and on the tax treatment of the fund.

*  You could get back more or less than this.

*  All friendly societies use the same rates of growth for illustrations but their charges vary.

*  Do not forget that inflation would reduce what you could buy in the future with the amounts shown.

Your Questions Answered

What is the Compass Savings Plan?

It is a tax-exempt unit-linked regular premium whole of life policy with premiums payable for a fixed term of at least 10 years. (See also the section below headed "Taxation").

How much am I allowed to invest?

Currently, the government restricts the amount that each individual can invest in a tax-exempt friendly society policy to £270 per annum, if premiums are paid yearly, or £300 per annum if premiums are paid more frequently than yearly (ie £25 per month). If you already have a tax-exempt friendly society policy, a lower premium may be allowed.

How do I pay the premiums?

Premiums are normally payable monthly or yearly by standing order.

How will the premiums be invested?

Premiums will be invested in the Compass Equity Fund with the objective of long term capital growth through stock market investment. The Fund is divided into units which are allocated to the Plan according to the premium paid after charges. Investment expertise is provided by Mellon Fund Managers Limited (formerly Newton Fund Managers Limited) and currently the Equity Fund's assets will be invested in shares in the Newton Managed Fund and the Newton Income Fund which invest to achieve capital growth and income from a portfolio of UK, EU and international securities.

How do I keep track of the value of the Savings Plan?

We will send you an annual statement of units allocated to the plan together with the current unit price. If you require any information at any other time, please contact the Society.

What happens if I stop paying premiums?

If less than one year's premiums have been paid, the plan will have no value. Thereafter, the policy may be encashed for the value of the units allocated to it, calculated at the next valuation date. Alternatively, the Plan may be made paid-up provided the value of units exceeds £500.

What happens if I die?

A sum assured will be paid equal to the greater of 75% of the total gross premiums payable throughout the premium paying term of the plan (but excluding any premiums payable after age 75) or the value of the units allocated to the plan.

How will charges and expenses affect my investment?

The charges made on the Savings Plan illustrated are as follows :-

*  An initial charge of 25% of the first year's premiums.

*  An annual investment management charge of 1.5% of the value of the fund to which the plan is linked plus Trustee, audit and other charges, currently totalling 0.16%. Where the fund invests in unit trusts or OEICs, any management and other charges made by the unit trust or OEIC managers will be offset against the above charges.

*  £1.00 per month administration fee deducted from the plan's value.

*  A charge for life cover will be deducted monthly from the Plan's value. The cost of the life cover is determined by the Society's actuary - the rates vary according to age and may be changed from time to time.

The effect on a Savings Plan investment of £25 per month assuming growth of 7% a year is set out below. These figures are not guaranteed, and serve only to demonstrate the effect of charges and expenses on an investment.

Warning If the plan is cashed in during the early years you could get back less than the premiums paid in.

year :-

£

£

£

£

THE EARLY YEARS

THE LATER YEARS

What are the deductions for?

*  The deductions include the cost of life cover, commissions, expenses, charges, any surrender penalties and other adjustments.

*  The last line in the table shows that over the full term of the plan the effect of the total deductions could amount to £666.

*  Putting it another way, leaving out the cost of life cover, this would have the same effect as bringing the investment growth from 7% a year down to 3.8% a year.

Taxation