This
page explains the Children's Celebration Bond in more detail.
Please
read it carefully.
Before
proceeding to the application form, please acknowledge below that you have
read this document.
Key
Features of the
COMPASS
CHILDREN'S CELEBRATION BOND
Its
Aims
*
To enable you to save regularly
on behalf of a child in the Society's tax-exempt fund.
*
To
provide the child with a tax-free lump sum payable at the end of a
selected term of years.
*
To provide guaranteed life
cover for the child after reaching the age of 10.
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 Bond 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 Bond is encashed within the first few years it is
unlikely to pay back as much as you have put in.
An
Example
A
grandparent saving
£25 per month for 15 years on behalf of a 3 year old child.
What might the child get back at the end of the Bond
term?
If investments grew at 5% a year, the child would
receive £5430
If investments grew at 7% a year, the child would
receive £6340
If investments grew at 9% a year, the child would
receive £7420
*
These figures are only examples and are not
guaranteed - they are not minimum or maximum amounts. What the child will get
back depends on how the investments grow and on the tax treatment of the fund.
*
The child 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 Children's
Celebration Bond?
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. The Celebration Bond will, at all times, belong to
the child. (See also the section below headed "Taxation")
How
much am I allowed to invest on
behalf of the child?
Currently, the government restricts the
amount that can be invested by or on behalf of each individual in a tax-exempt
friendly society policy to £270 per annum, if premiums are paid annually, or
£300 per annum if premiums are paid more frequently
than yearly (ie £25 per month). If the child already has 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
Bond 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 Bond?
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 Bond will have no value. Thereafter, the policy may be encashed
(for the benefit of the child) for the value of the units allocated to it,
calculated at the next valuation date.
Alternatively, the Bond may be made paid-up provided the value of units exceeds
£500, or someone else might take over the responsibility to pay future
premiums.
What happens if the child dies?
If the child is aged under 10, the
total gross premiums paid to date will be payable. Thereafter, a sum assured
equal to 75% of the total gross premiums payable throughout the premium paying
term of the plan will be paid. In either case, the value of the units allocated
to the plan will be payable if this is greater.
How will charges and expenses affect my
investment?
The charges made on the Celebration Bond 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 once the
child reaches age 10 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 Celebration Bond
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 the child could get back less
than the premiums paid in.
At
end of
year
:-
Total
paid in
to
date
£
Total
actual
deductions
to date
£
Effect
of deductions
to
date
£
What
the child
might
get back
£
THE EARLY YEARS
1
300
92
92
218
2
600
111
117
526
3
900
136
150
849
4
1200
166
191
1190
5
1500
202
241
1540
THE LATER YEARS
10
3000
484
657
3640
15
4500
972
1470
6340
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 £ 1470.
*
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 4.4% a year.
How much will the advice cost?
This illustration assumes that you will not seek the advice
of an independent financial adviser and therefore does not allow for the payment
of commission.
If you are in any doubt about the suitability of the
Celebration Bond, you may wish to consult an independent financial adviser.
Unless the adviser charges you a fee, commission would probably be payable and this would be reflected
in the amount invested in your policy and the benefits would reduce accordingly. A
revised illustration would be provided on request.
Further
Information
Cancellation Rights
After your proposal is accepted you will receive a notice of
your right to cancel. You will then have 30 days in which you can change your
mind. If you cancel, you will receive a full unconditional refund.
Taxation
The benefits payable at maturity or on the child's earlier
death are free of all UK income and capital gains tax. If the policy is
surrendered within three-quarters of the premium paying term or 10 years if
earlier some UK income tax may be payable (depending on the child's personal tax
circumstances).
The fund in which premiums are invested is free from taxes on
income and capital gains, with the exception of tax deducted from dividends on
shares.
Compass Friendly Society Limited
Compass Friendly Society Limited is registered and
incorporated in England under the Friendly Societies Act 1992. It is a mutual
organisation owned by its members. By investing in a Children's Celebration
Bond, both the donor and the child become members of the Society. The Head
Office is at Old Bank House, 59 High Street, Odiham, Hampshire RG29 1LF, United
Kingdom. The Society is authorised and regulated by the Financial Services Authority and is a
member of the Financial Services Compensation Scheme.
Queries and Complaints
For further information or if you wish to complain about any
aspect of the service you have received, please contact Compass Friendly Society
Limited. If your complaint is not dealt with to your satisfaction you can then
complain to the Financial Ombudsman Service (South Quay Plaza, 183 Marsh Wall, London E14
9SR, Telephone 020 7964 1001).
Making a complaint will not prejudice your right to take legal proceedings.
Membership of a Friendly Society
Membership is subject to the Rules of the Society which may
be varied from time to time. The Financial Services Authority monitors all such
amendments, as well as the financial strength of societies and has a statutory
duty to protect the interests of all members.
Cashing in the Policy
The Bond may be encashed at any time by sending the policy
document to Compass Friendly Society Limited along with an appropriate letter
requesting the surrender.
General
Law
In legal disputes the Law of England and Wales will apply.
Compensation
Information on compensation is available from Compass
Friendly Society Limited on request.
Please Note
This leaflet is based on our understanding of current law and
Inland Revenue practice, which may be subject to change.
This leaflet provides a guide to the key features of the
Compass Children's Celebration Bond. Full details are contained in the Terms and
Conditions which form part of the legally binding contract between the members
and Compass Friendly Society Limited, copies of which are available on request.
To
apply for a Children's Celebration Bond
Please
acknowledge that you have read the above Key Features Document and
that you wish to proceed by clicking here
