Even if you already have a pension, there are additional investment options that could make your resources work harder for you.
These vary depending on your attitude to risk and what you are looking to achieve. For example, you might be looking for growth to beat inflation or income to boost your pension. The trick is to balance the risk and reward without taking you too far out of your comfort zone.
Please be aware when reading the sections that follow the value of your investments can fluctuate and you may not get back the full amount you originally invested.
Collective Investments
ISAs, Unit Trusts/Open Ended Investment Companies (OEICs) and Investment Bonds are generally referred to as Collective Investments.
Collective Investments are investments where your money is put into a fund, along with money from other investors. This pool of money is invested across many different asset classes by investment managers. Over time these investment managers will make adjustments to their funds depending on performance, economic conditions and their fund's objective.
Like Investment Bonds and other Collective Investments, the relevance of these investments in your portfolio will depend on your tax and other financial circumstances.
ISAs
An ISA is a tax-efficient way to invest in stock and shares (investment funds) or cash. Subject to limits set by the government, an ISA allows you to invest free of income, dividend and capital gains tax.
The annual allowance is £20,000, which you can put into collective investments, cash or a mixture of the two. You can choose collective funds from a large range to match your attitude to risk.
A consolidation of previously made ISA contributions could also be considered to maximise their investment efficiency.
Investment Bonds
Investment Bonds – or Insurance Bonds – are a single payment life assurance policy, but act more like an investment than insurance.
Investment Bonds can be a good way of allowing you to invest in a mixture of investment funds managed by investment managers. Each Bond is usually designed to provide benefits for different types of investors, but a common element is that they aim to produce long-term capital growth and/or generate a long-term tax efficient income.
Investment Bonds include the ability to take withdrawals, often tax efficiently and with relative ease.
Unit Trusts / Open Ended Investment Funds (OEICs)
Unit Trusts and OEICs - which are a modern version of Unit Trusts - also allow you to invest in a mixture of investment funds. This type of investment could be considered as they can (depending on other collectives or stocks and shares you may hold) allow you to make use of annual tax allowances.
Structured products
There are two types of Structured Products: Structured Investment and Structured Deposit Products.
A Structured Investment Product is essentially a contract between the investor and a bank whereby the investor ‘lends’ money to the bank for a specific term, typically five years. At the end of the term the investor receives the investment return. The return is based on a formula usually related to the performance of a Share Price Index (FTSE 100) or a basket of individual shares.
Structured Investment Products are not covered by the Financial Services Compensation Scheme and consequently you may get back less than you invested.
Structured Deposit Products are similar to the Investment Products except that the money is ‘deposited’ in the bank. Structured deposits are designed to return at least the initial amount deposited at the end of the product term.
Structured Deposits may benefit from the Financial Services Compensation Scheme deposit insurance.
For more information call Keith Galgut on 07775 507 331.
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