Investments / Regular Savings

There are numerous investment vehicles ranging from more secure “deposit” type investments to “asset backed” investments which usually include a degree of risk. Before are some of the more popular investments.

Deposit Based Investment

A number of deposit-based investment products are available. They are usually with a bank or building society and can pay variable or fixed rates of interest. Most deposit based investments are guaranteed up to £85,000 by the UK Government backed Financial Services Compensation scheme (FSCS). For compensation limits to apply to each individual account, you’d need to hold money with different banks that don’t share a licence.

A basic rate tax payer has a personal savings allowance of £1000 meaning that the interest on the first £1000 of savings is tax free. High rate tax payers on 40% have an allowance of £500 whilst 45% taxpayers do not qualify for this tax break.

National Savings & Investments ‘NS&I’

NS&I offer various products which are backed by the UK Government up to the prescribed investment limit. This means that they are 100% secure.

At any time they offer:

  • Premium Bonds
  • ISAs
  • Savings Accounts
  • Bonds

NS&I products are not regulated by the Financial Conduct Authority

Individual Savings Accounts (ISAs)

Individual Savings Accounts, commonly referred to as ISAs are one of the more tax efficient ways to save. There is now far greater flexibility and transfer options.

There are various types of ISA but the most popular are cash ISAs and Stocks & Shares ISAs. There is an annual combined ISA limit of £20,000. This can be split across any combination of cash and stocks & shares.

You can also transfer new and previous year’s ISA investments from cash into stocks & shares and vice versa, which was previously restricted.

Some flexible cash ISAs will allow withdrawal of funds and replacement within the same year, without it affecting the total ISA annual limit.

Open Ended Investment Companies (OEICS) or Unit Trusts

These are pooled investments run by companies such as professional Investment Managers.

They are medium to long term investments and pricing is based on the current value of the units or assets.

Income can be re-invested or distributed.

Investment Bonds

These are usually lump sum investments and are officially termed non-qualifying life assurance policies.

Also medium to long term investments of various types but the value is usually linked to fund performance from a range of available funds.

One of the key attractions for higher rate tax payers is the ability to withdraw up to 5% of the original investment each year tax free.

Investment Trusts

Similar to OEICs or Unit Trusts in that they are pooled investments, managed for the medium to long term. However, they differ in that the funds are called “closed-ended” and are run by limited companies.

The value or price moves depending on market sentiment and is usually quoted as a premium or discount to the underlying asset value.

Equity investments do not afford the same capital security as deposit accounts. The value of your investment (and any income from them) can go down as well as up and you may not get back the full amount you invested. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

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