Jasmine Birtles
Your money-making expert. Financial journalist, TV and radio personality.
What Is a Mutual?
Moneymagpie Team
9th Mar 2021
Mutual organisations have been around for centuries and can be found within all sectors of financial services. But do you know what a mutual is?
- The History of Mutuals
- How are Mutuals Different?
- The Benefits of a Mutual
- Where to Find a Mutual
- More Ways to Save
The History of Mutuals
Mutuals are a group of organisations which come under a few different names such as friendly society, building society, mutual insurer and credit union. Most are long-established and some have been around for hundreds of years! They all run on the same basis and are built of a sense of ownership: save with them and benefit from being part of the community (other savers).
Mutuals, such as Foresters Friendly Society, were the original form of social network, established before the introduction of the welfare state, where a group of people contributed to a mutual fund, to then receive benefits at a time of need.
Many mutuals still have a savings focus and these days, the mutual sector has diversified to include housing associations, clubs, employee owned bodies and specialist bodies such as football supporter trusts and community mutuals.
There are also lots of new mutuals in the public sector – new independent organisations providing public services, such as NHS Foundation Trusts, Leisure Trusts, Co-operative Schools and Community Housing Schemes.
How Are Mutuals Different?
You’ve heard of shareholders. Every year, the news tells us about the huge dividends shareholders receive. A mutual, however, is owned by its savers, also known as members. There are no shareholders!
That means you, as a mutual customer, can have a say in how the organisation operates should you wish. You benefit from the mutual’s success, too – instead of profits going to shareholders who have no connection with the fund the money is re-invested for the benefits of members, to best meet their needs.
In addition, friendly societies can offer a unique tax-free savings plan outside of the annual ISA allowance. With a Tax Exempt Savings Plan, you can save an additional £300 a year (£25 a month) through a friendly society.
The Benefits of a Mutual
Today, UK mutuals are big business. According to the Association of Financial Mutuals, they account for £133 billion in revenue every year and it is estimated that 1 in 3 of the adult population is a member of at least one mutual.
Treating customers as members is only one benefit of mutual societies. One significant advantage is still steeped in the tradition of the additional support a friendly society can give you in times of need. For example, Foresters Friendly pays back over £1million every year in discretionary grants to its members, as part of its member benefits package.
This type of benefit isn’t regulated by the Financial Conduct Authority or Prudential Regulatory Authority – and that means a friendly society or mutual can adapt and change the benefits they offer with ease. It makes them more adaptable and means they can serve their members (customers) much more effectively.
Mutuals also offer affordable saving (and, if you need it, some offer affordable lending too). While there are options available for lump sum savings in an ISA or Investment Bond – such as if you get an inheritance, redundancy payout or other windfall – there are plenty of ways to save regularly too . It makes saving much easier and means you can save even on a tight budget.
Where to Find a Mutual
As mentioned above, there are different types of mutual, most of which belong to the Association of Financial Mutuals. Some are local credit unions, which you can find using the Association of British Credit Unions website.
One of our partners, Foresters Friendly Society, is also the 7th largest friendly society in the UK under funds management, and dates from 1834 – so you know they’re treating their members right! We’ve also put together a FREE eBook with them, all about creating your safety savings net for your short, medium, and long-term goals – even on a tight budget. Download it for free HERE.
More Reading
Want to know how to find extra cash to save into a mutual? Perhaps you want to know more about investing with ISAs. Read on!
- 50 Money-Saving Tips for Parents
- Save Money, Save Water
- 8 Ways to Make £500 This Month
- Ten Ways to Get Free Money
- How to Invest When You Don’t Know Anything!
A Stocks & Shares investment may provide a higher potential for returns but with slightly more risk so there is the possibility that you may not get back what you have paid in depending on the investment conditions when you cash-in your plan.
The content of this article is for information purposes only and does not constitute financial advice. Foresters Friendly Society do not offer financial advice. If you’re unsure as to the suitability of a product you should seek advice from a Financial Adviser. You may have to pay for this advice.
Ver well explained.