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Ask Justin

Ask Justin

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Which police mutual ISA?

Investment | ISAs Helpful? 9

Asked by SammyT, submitted 03 August 2010.

Open Quote Which is the better bet for Police Officers and ISA's - Police Mutual PMAS or Metfriendly / MPFS ?

I am a police officer with 5K to invest into an isa. I would like to use a mutual police organisation as this is important to me. I have known the PMAS (Police Mutual) for many years and still enjoy good returns but recently saw the Metfriendly / MPFS also offer police officers products. I like the look of the metfriendly isa but am concerned about what I've read about them and their financial stability, my collegues tell me they were close to going under last year.
End Quote

Answered by Justin on 05 August 2010

The Metropolitan Police Friendly Society (MPFS or ‘Metfriendly’) offers just one ISA, which invests in its with-profits fund. I’m reticent to recommend with-profits, as while smoothing investments ups and downs is a nice concept it doesn’t always work that well in practice and it’s difficult to find out exactly what’s going on under the bonnet (you can read more about with-profits in our investment section).

Looking through MPFS’s accounts its assets (about £85 million) have hardly grown over the last 5 years, so it’s not a particularly dynamic business. 2008 was a bad year for the friendly society and poor investment performance led to it dipping into its reserve fund (used to pay annual and final bonuses on with-profits investments) by around £4 million to make ends meet, reducing it to £16.84 million. 2009 was a better year and it added £175,000 to the reserve fund, bringing it to just over £17 million.

MPFS seems to do an ok job of running its business and certainly isn’t on the verge of going bust (based on 2009 accounts it has £9.6 million more reserves than required by the FSA). Nevertheless, it is relatively small and if stockmarkets dive it could struggle to maintain worthwhile with-profits bonuses for investors (this might be one of the reasons it tried to merge, unsuccessfully, with PMAS last year – apparently spending over £300,000 in the process).

PMAS offers three ISA options: a cash ISA via Skipton Building Society and two stocks & shares ISAs - one with-profits and the other (called ‘Investment Choice’) investing via the Fidelity FundsNetwork fund supermarket.

As with MPFS I’d skip the with-profits option. The cash ISA currently pays 2.3% a year, which is reasonable given it doesn’t include a bonus, but it’s variable so you’ll need to watch carefully to ensure it remains competitive. C&G currently pays a ‘best buy’ 2.7% but this includes a 1.7% bonus for the first year, although you can then transfer elsewhere.

The PMAS Investment Choice ISA via Fidelity provides access to over 1,100 funds, although PMAS offers three core choices: the Fidelity Moneybuilder Growth, Balanced and Income funds. Each has no initial charge and annual charges of 1%, 1% and 0.8% respectively. Performance has generally been reasonable versus peers and none of these three funds is likely to be a bad choice over time.

Both the PMAS cash ISA and Fidelity stocks & shares ISA are potentially worthwhile, depending on how much risk you want to take. My only observation is that you could typically save around 0.5% a year by accessing Fidelity FundsNetwork via a discount broker that rebates trail commission, e.g. Cavendish Online.

My previous criticism of PMAS was aimed at its endowment savings plan, which appears to be the one most pushed towards potential customers. MPFS is sadly no different in this respect as it too pushes endowment savings plans. I don’t like these plans as they’re automatically taxed at basic rate (less tax efficient than ISAs), inflexible, tend to deliver unattractive returns and invest in opaque with-profits funds. I know some PMAS customers have disagreed on this site, but believe me; endowment savings plans really aren’t very attractive in the scheme of things.

If you want to use MPFS or PMAS I’d suggest using either the PMAS Cash or Investment Choice ISAs and avoid both the PMAS and MPFS ISA with-profits options.

Please note this answer does not constitute a recommendation or financial advice and should not be relied upon when making specific investment or other financial decisions. You should always undertake your own research into whether a product or service is appropriate for your needs and, if necessary, use a qualified professional adviser.

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Readers' Comments (2) - To post a comment please register or login .

Comment by SammyT at 11:33pm on 05 Aug 2010:

Thanks Justin - in the end PMAS looked the bigger and more secure company so have split the money 50:50 between the PMAS cash isa and the PMAS fidelity isa - all done on-line and hassle free experience which has to be a result, thanks for your help.

Comment by brianp at 12:07am on 06 Aug 2010:

Good call sammyT, your right, opened my PMAS cash isa in just a few mins and all online, no stress. only a few hundred quid but us public servants need to save every penny! - have never heard of MPFS / Metfriendly but a quick google search revealed justin is not alone and the daily mail dont seem to be huge fans either........