If you are considering making an investment or want to review your existing arrangements we can help. It is important to many of our clients that they ensure their investments are working hard for them. We can help you build an investment strategy taking account of all your needs and preferences. An important part of investment planning is to ensure that your investments balance your needs for growth, income or a combination of both. It is our aim to ensure all our clients' understand what investments they hold and also the risks of investing over the long term. In our experience no two clients are the same, this is why our advisers take the time to understand your needs, wants and attitude to investment risk prior to making any recommendations to you.
Below we have provided information on the different types of investment available, it is important to take advice about which type of investment is right for you, and the following descriptions are provided for information only.
Deposit Account
There is an abundance of deposit accounts available from providers ranging from banks/building societies to supermarkets. Some accounts offer competitive rates with instant access whilst others impose “notice” periods before withdrawals can be made. All accounts provide a rate of interest payable on the capital invested.
National Savings
National Savings are a secure investment guaranteed by the British Government. This product is therefore an ideal, secure, tax efficient home for your money and can be considered part of your liquid assets.
National Savings Capital Bonds
Capital Bonds guarantee fixed rate compound growth when held for a full five year period. The return is taxable but is credited gross. Bonds may be held in sole or joint names. Penalties apply on early redemption. Repayment is available with about 10 working days notice.
National Savings Children's Bonus Bonds
Children's Bonus Bonds offer a guaranteed and tax free return at a fixed annual compound interest rate when held for five years, the rate varying with each issue. Further guaranteed returns are notified before each following fifth anniversary up until the holder is age 21. Children's Bonus Bonds can be effected by anyone over 16 for anyone under 16. Penalties apply on early redemption. Repayment is available with about 8 working days notice.
National Savings First Option Bonds
First Option bonds offer a 12-month guaranteed return notified annually. Returns are taxable and basic rate tax is deducted at source from the bonds, which may be held indefinitely. Bonds may be held in sole or joint names. Penalties apply on early redemption. Repayment is available with about 8 working days notice.
National Savings Income Bonds
Income Bonds provide a regular monthly taxable income paid gross. The rate is variable and is enhanced for holdings over £25,000. Bonds may be held in sole or joint names. Penalties apply on early redemption and three months notice is required.
National Savings Certificates
National Savings Certificates are guaranteed and tax free, and offer a fixed annual compound interest rate at outset guaranteed when held for five years. The rate varies with each issue. Penalties reduce the return on early redemption. Repayment is available with about 8 working days notice.
National Savings Index Linked Savings Certificates
Index Linked Savings Certificates offer a rate of interest equivalent to the rate of inflation, plus extra interest at a rate published from time to time with each new issue. They offer a guaranteed, inflation proof and tax free return to all holders regardless of tax rate. Penalties reduce the return on early redemption. Repayment is available with about 8 working days notice.
National Savings Investment Account
Investment Accounts offer variable interest rates enhanced on a sliding scale according to the amount invested. Interest is taxable but is paid gross. One month's notice is required for withdrawals.
Ordinary Accounts pay tax-free interest at low rates credited annually on 31st December. Accounts may be held in sole or joint names. Up to £100 may be withdrawn on demand or £250 at larger post offices. Larger amounts usually require a few days notice.
Pensioners Bonds pay a regular fixed monthly income guaranteed for five years. This is taxable but is paid gross nevertheless. Individuals aged over 60 may hold bonds in sole or joint names. Penalties apply on early redemption and three months notice is required. Sixty days notice is required of withdrawal save at the fifth anniversary, and during this notice period no interest is paid.
Premium Bonds pay tax-free prize money with a top monthly prize of £1,000,000. Bonds become eligible to participate in prize draws one calendar month after purchase. Premium Bonds are available to individuals over age 16 or under that age if bought by parents, guardians or grandparents. Eight working days notice is required for repayment.
Individual Savings Accounts (ISAs)
There are three basic types of ISA: Maxi, Mini and TESSA-Only. The two types of investment that may be contained currently within a Maxi or Mini-ISA are:
Cash;
Stocks and Shares (which includes unit trusts, OEICs, investment trusts etc.)
A Mini ISA may be offered as a ‘wrapper’ for any one of the two types of investment, but may not contain more than one type. A client wishing to invest in each of the two therefore, and wanting to use different providers for each, would need to separately effect a Cash Mini-ISA and a Stocks & Shares Mini-ISA.
Maxi ISAs on the other hand may contain both types of investment within the one wrapper, but do not have to offer cash options. Many Maxi ISAs offer investment only in stocks and shares.
An investor may effect either in one Maxi ISA or up to two separate Mini ISAs in any tax year. Maxi and Mini ISA options may not be mixed however, so it is not possible, say, to invest £3000 in a stocks and shares Maxi ISA whilst effecting a £1000 cash Mini ISA with another provider, even if the Maxi ISA provider does not offer a cash deposit option.
The £7000 annual ISA limit for 2006/2007 allows up to £4000 to be invested in stocks and shares and £3000 in cash. Alternatively using the Maxi-ISA route £7000 may be invested in stocks and shares. Investors wishing to maximise their investment in stocks and shares through an ISA should always choose a Maxi-ISA.
TESSA-Only ISAs offer investors the opportunity to reinvest the capital element from the proceeds of a maturing TESSA Account (but not the accrued interest) into a new tax-free environment. The ‘rollover’ must be effected within six months of the vesting date of the original TESSA. Rolling over TESSA contributions into a TESSA-Only ISA will not affect the investor’s normal ISA entitlement for the year in question and need not be effected with the same manager as the Maxi or Mini-ISAs chosen by the investor for their normal year’s contribution.
Funds cannot be switched directly from PEPs to ISAs and there would in any case be little point in such a transaction, the tax treatment of PEPs and ISAs being largely identical.
Investors have no personal liability to income tax or capital gains tax on income or gains arising from investments held within an ISA. Equally, capital losses cannot be used to offset capital gains realised elsewhere. No details of ISA investments, income received or gains realised need be included on your annual tax return.
ISAs may not be written on a joint basis or in trust.
The Government has introduced a so-called ‘CAT Standard’ for ISAs, ‘CAT’ standing for Cost, Access and Terms. The meaning of this for the type of ISA I have recommended is explained below.
To qualify for a CAT Standard a Stocks & Shares ISA may make an annual charge of no more than 1% but may make no other charges. The minimum contribution may be no greater than £500 as a lump sum or £50 per month. The investment must be single priced and be an authorised unit trust, OEIC or investment trust with at least 50% invested in EU securities.
Unit Trusts / Open-Ended Investment Companies (OEICs) / Investment Companies with Variable Capital (ICVC)
A Unit Trust / OEIC / ICVC is a collective investment vehicle. The main benefits for investors are that:
Professional investment research and management is made affordable for even the smallest investor;
Risk is spread over dozens or even hundreds of different holdings within the fund, each investor effectively owning a small proportion of each;
Economies of scale cut dealing costs when holdings are bought and sold;
These funds can invest across a broad range of asset classes and investment markets
Investment Trusts
An Investment Trust is a company that is specifically set up to invest in the shares of other companies. Investment Trusts are made up of a fixed number of shares determined at the outset, which are then traded on the stock exchange. The value of the shares in an investment trust is therefore dependent on the demand for the shares in the trust, and unlike the units in either a Unit Trust or OIEC the value of the shares is not always directly linked to the value of the investments it holds.
Investment Bonds
An investment bond is technically a single premium life assurance contract although the life cover aspect is only nominal. Bonds are collective investments in which the investments of many individual investors are pooled. This pooling enables relatively small investors to benefit from the economies of scale made available to institutional fund managers.
A wide choice of managed, general and specialist funds are available offering investment opportunities in equity, property and fixed interest securities. Bonds enjoy the facility to switch between these internal insurance company funds at a reasonable cost if desired. Although classed as single premium investments, 'top up' facilities are offered, allowing further amounts to be invested either on a regular or ad hoc basis.
Guaranteed Products
There are various Guaranteed Products available which provide varying levels of capital protection and a range of investment environments. These tend to be available for a short period and then close, they may also have a limit on the amount of money which can be invested.
