Many people are coming to realise that to accumulate a capital sum to meet a future need or simply have a nest egg they need to take action and save regularly. The good news is that for those who want to provide for themselves and their families there are a range of flexible options to suit everyone. We will help you identify your savings goals and advise you which options from the whole market place will the most appropriate for your needs.
ISA’s
There are two basic types of ISA:
Cash;
Stocks and Shares (which includes unit trusts, OEICs, investment trusts etc.)
Owing to the fact that ISAs enjoy major tax advantages, the level of investment for the tax year 2011/2012 is restricted to £10,680. Both capital profits and income receipts are totally free from any liability to tax within the fund. Indeed, where interest accruing to an ISA on corporate or government bond holdings is received with a 20% tax credit, that credit remains reclaimable by the fund managers. Furthermore, as the underlying fund is a unit trust / open-ended investment company, you will also benefit from professional fund management.
Due to the tax-efficient nature of ISAs, there are rules governing contributions as follows:
The ISA investment allowance for the 2011/2012 tax year is £10,680. Up to 50% of that allowance can be saved in cash with one provider. The remainder can be invested in stocks and shares with either the same or a different provider.
ISA savers will be able to invest in two separate ISAs each tax year; a cash ISA and a stocks and shares ISA.
ISA savers are able to transfer money saved in their cash ISA to their stocks and shares ISA
Investors have no personal liability to income tax or capital gains tax on income or gains arising from investments held within an ISA. However, 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 will be available indefinitely.
ISAs may not be written on a joint basis or in trust.
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
Endowments
An Endowment Assurance provides a level of life cover (chosen at outset) for a fixed term. Premiums are designed to cover the cost of this cover together with an investment element used to provide a capital lump sum at maturity. Investment can be made into a With Profits or into a Unit-linked environment. The ultimate maturity value is not guaranteed and depends upon the returns achieved by the underlying funds selected.
Friendly Societies
Friendly Society tax-exempt funds grow free of all taxes. This means that, all things being equal, your money should grow faster than it would in a fund with no such tax advantages. The final maturity proceeds can also be taken tax-free.
Due to these advantages the government restricts the amount that any one individual can invest.
Maximum Investment Plans
A Maximum Investment Plan is a life assurance-based investment contract. For higher rate taxpayers these plans can be very tax efficient. The funds in which the plan invests are subject to tax on their income and capital gains at a rate roughly equal to basic rate income tax. At maturity the proceeds can be taken tax free, which means that you effectively avoid any charge to higher rate tax.
Surrender values in the early years are likely to be low. Furthermore, if you encash the plan before maturity you may be liable to higher rate tax on the excess of the surrender value over the sum of premiums paid. You should also be aware that the value of units can fall as well as rise.
The plan offers links to a wide choice of funds investing in equity, property and fixed interest securities. Switches can be made between these internal insurance company funds at a reasonable cost if desired.
