Why our ‘mutual’ status is good news for you!

Posted by / September 7, 2020

No external stakeholders gobbling up profits.

A long history of putting customers and community first.

Commitment to bringing more stability to public finances.

Just three of the reasons we are proud to be one of 10,000 mutual societies in the UK. But what exactly is a mutual society? And what are the benefits of becoming a PG Mutual policyholder?  

Let’s take a look.

What is a mutual society?  

A mutual society is a financial services organisation that’s owned by its members. There are more than 10,000 mutual societies in the UK today. Examples include building societies, credit unions and certain types of insurer (like us).

So, what makes mutual societies different? Well, you may have noticed there’s an awful lot of hot air in today’s marketing landscape about putting the customer first. With mutuals that ethos is stitched into the founding principles of the company.

For example, because mutual societies are owned by their members, there are no external shareholders to pay. So, a mutual society’s annual profits are either shared among members or reinvested into making the mutual stronger for everyone. (Or a combination of the two.)

Couple that with a strong focus on supporting local communities and it’s no surprise that mutual society’s tend to have high levels of customer satisfaction.

Where do mutual societies come from?

The first mutual societies started life hundreds of years ago. In a time before insurance companies and state benefits, mutual societies were a crucial helpline for people in need. The idea was simple: each member of the group pays a regular contribution into a pooled pot of money, which any member can then draw from when they encounter financial hardship – whether through ill health, loss of income or something else. In that regard mutual societies were the original torchbearers for the insurance market you know today.

During the founding days of mutual societies, subscriptions would be paid at a regular social gathering in the community. But over time mutual societies began to form around certain professions or industries. For instance, PG Mutual was originally established in 1928 by pharmacists to support others in the pharmaceutical community. You can read a little more about our story here. Oh and don’t worry. You no longer need to be dressed in a lab coat and goggles in order to join us.

Are mutual societies still relevant today?

Very much so. Because of their community focus, mutuals tend to invest the majority of their assets in UK bonds, shares and property. That helps to support the domestic economy. Mutual societies also provide a refreshing alternative to the profit-mad corporations in the world of global financial services. That promotes diversity and fair competition in the marketplace – helping to keep financial services more affordable for everyone. Finally, local credit unions can often help people with a poor credit history obtain financial support at fairer rates of interest – keeping them out of the hands of payday lenders and mitigating the risk of spiralling debts.

Yes, we’re biased. But we think mutual societies should be celebrated.  

Are mutual societies safe?

It’s totally natural that you may feel a little uncertain about paying your hard-earned money into a company you are unfamiliar with. With mutual societies, there’s no need to worry. Just like the big names in banking and insurance, mutual societies are regulated by the Financial Conduct Authority. They’re also covered by the Financial Services Compensation Scheme (FSCS). That gives you a way to recover money you have deposited in a mutual society in the event that they go bust.

There’s strength in numbers

The more people who become members of a mutual society, the stronger the society becomes. And each member has a role to play in the gains or losses of the fund. But that’s not the only way you can benefit from the pooled resources of a mutual society. 

To keep their pot buoyant, large mutual societies invest some of the available funds. And to diversify the risk of investment, mutual societies will typically make diverse investments across many different industries. A combined pool of money has far more purchasing power than each individual’s contribution – meaning mutual societies can access investment funds on preferential terms, all while giving your personal investment portfolio a level of diversification that would be cost-prohibitive to achieve alone.

Putting the mutual in PG Mutual 

PG Mutual’s primary mission is to cover income for our policyholders when they are unable work due to illness or injury. But our policies have a second objective: helping you to save for your future. Each year, once we have covered the cost of running the business and keeping the shared pot healthy, we share remaining profits with our policyholders as an annual bonus.

Here’s where it gets clever. Your share of the profits will always be your share. But to try and maximise the benefit you derive from your profits, we combine all policyholder profits and invest collectively in a mix of equities, government gilts, corporate bonds, property and cash. This spread of asset classes allows for a balanced, long-term investment strategy that is designed to produce long-term growth while reducing losses.

You can find out more on our Key Information Document.

What does that mean for you?

The longer you remain a PG Mutual policyholder, the more opportunity your investment pot has to grow. For that reason we recommend staying with us for a minimum of ten years. At the end of your policy or when you retire, we will pay the money that’s accumulated from your profit share investments as a tax free lump sum – whether you’ve claimed on your PG Mutual policy or not.

A PG Mutual policy is more than an insurance policy. In exchange for your monthly premium, you get the peace of mind that your income will be covered if illness or injury takes you out of work. But you also get the investment element on top. In short: we help you protect your present, while building a nest egg for your future.

If you have any questions, just get in touch with our friendly customer service team. Or if you are interested in starting your journey with PG Mutual, you can get a quote for your policy online.

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