Investments

Investment Savings Account – ISA

InvestmentsAn ISA is a tax-free savings account, which means that they are both income and capital gains tax-free. You do not have to declare any income or interest you get from them.

You can invest into two main types of ISA: cash and shares.

Cash ISA

This type of ISA is usually offered by lending banks and Building Societies. You can put in regular contributions or a lump sum up to your annual allowance for that tax year.

This type of plan allows you access to your money if you need it, but there might be penalties to pay if you take your money out early.

Cash ISA’s are safe investments as you know what interest rate you are likely to get on your returns when you take it out, and as it is not linked to the stock market your money won’t go down.

Stocks and Shares ISA

This type of ISA allow you to invest in the stock market. They are more risky that Cash ISA’s as any movement in the markets will have an effect on your returns, meaning your investment can go down as well as up.

This type of investment allows you to invest in unit trusts, these are open-ended investment companies (OEIC’s), investment trusts, corporate bonds and individual shares.

Allowances

For tax year 2012-2013, every adult has an overall ISA allowance of £11,280. Individuals will be able to invest upto £11,280 into an investment ISA on the next tax year. Alternatively, they can invest upto £5,640 into a cash ISA and the remaining £5,640 into a stocks and shares ISA.

Unit Trusts

A unit trust reduces your risk of investing in the stock market by pooling your investment with thousands of others. The Unit Trust provider then spreads this money across a wide range of shares and other investments.

Unit Trusts are very cost-effective for the client, the charges are a fraction of what would it would cost the client if they bought the shares themselves directly.

  • By diversifying your investments, a Unit Trust will spread the risk automatically.
  • Unit Trusts can be for both growth and income, they are viewed as medium to long-term investments.
  • Income from Unit Trusts is liable to income tax, and potentially capital gains tax if your personal allowances and reliefs are not extended.

Investment Bonds

An investment bond normally allows you to invest in a mixture of investment funds and allows you to spread your risk by investing in sectors and countries so as to coin a phrase “don’t put all your eggs in one basket”. By spreading your risk you are not relying on one sector to produce your returns.

  • Bonds are usually medium to long-term investments, and are able to produce both growth and income for the client.
  • Investment bonds are single premium life insurance policies, meaning that a small amount of life insurance in provide with the bond.
  • Clients invest a lump sum of money into the bond they then choose to go for either growth or income.

Over the term of the plan, clients are allowed to take 5% of their original investment amount per annum from their bond for a maximum of 2 years tax-free. If they don’t take out their annual allowance this can be rolled over and taken in future.

As with all investments, these type of investments can fluctuate and you may not get back the full amount you invested.

With Profit Bonds

The “With Profit Bond” is a form of Life Insurance based investment. This type of bond usually requires the investor to deposit a lump sum. Most bonds are taken out for growth or income, and looked as medium to long-term investments.

The bond invests in a wide range of assets such as shares, fixed interest, property and corporate bonds. Your investment builds up with the addition of bonuses which are usually added each year, these are called revisionary bonuses. Once added they cannot be removed, and when the bond matures the product provider may pay our a terminal bonus but this is not guaranteed.

Unit Linked Bond

Unit linked investment bonds are investment bond plans which can offer the opportunity for better returns but with higher risk as your capital is not secure, as the investment is linked to movements in the stock market.

Unit linked bonds do not guarantee to pay out a guaranteed sum assured, your investment s made directly into the assets defined by the fund investment objectives.

The value of your investment can go up as well as down, and your may not get back the original amount invested.

How should I Invest?

The amount you have to invest, how quickly you need to get at the money in your investment and a number of other factors will guide us in advising you of your options.

Please call Jan on 01706 830678 for advice, or use our enquiry form.