The term “investment” is extremely broad and covers deposit accounts in banks through to ISAs, unit trusts, OEICS, and single premium investment bonds.
Deposit based investments in banks or building societies, including cash ISAs, provide only interest and not capital growth. To achieve capital growth, important in any cohesive investment strategy over a medium to long term time frame, it is necessary to look towards collective investments connected with the stock-market.
In its role as an independent financial adviser, Sandham, Davies & Jones Ltd is able to advise on all forms of investment other than shares. Two important factors to keep in mind are diversification and attitude to risk. Clients wishing to consider investments would first need to complete a fact-find in order that their own unique attitude risk may be incorporated within any recommendation.
ISAs (Individual Saving Accounts)
Since the 6th of April 2008, maxi and mini ISAs have both disappeared. From now on, life will be simpler for ISA investors because there are only rwo kinds of Isas to consider: a cash ISA or a stocks and shares ISA. The new limits set in 2010 will be indexed from 2011.
The maximum you can invest in an ISA from 06.04.2010 is £ 10,200.
Investors are able to subscribe:
- upto £ 5,100 in a cash ISA; or
- their full ISA investor allowance of £ 10,200 in a stocks and shares ISA; or
- the total annual ISA investment can be divided between both types of ISA - i.e upto £ 5,100 can be invested in a cash ISA and the balance into one stocks and shares ISA.
Both types of ISA can be with the same ISA manager, or each can be with a different ISA manager. As before, you will not be able to invest in two ISAs of the same type in the same tax year.
There has been no change to the rules for transferring like for like ISAs from one manager to another. Cash ISA investors can transfer some or all of the money invested in cash ISAs in previous tax years, to a stocks and shares ISA without it affecting their current tax year annual investment allowance.
ISA investors are able to transfer money invested in a current tax year from a cash ISA to a stocks and shares ISA - on condition that every penny in the cash ISA is transferred.
ALL PEP ACCOUNTS WERE RECLASSIFIED AS STOCKS AND SHARES ISAS ON THE 6TH OF APRIL 2008 AND AS A RESULT HAVE BECOME SUBJECT TO ISA RULES.
Unit Trusts and OEICS
These again are collective investments, though without all the tax breaks afforded to ISAs. Extremely useful for long term investment because any gains made count towards an individual’s capital gains allowance and not income tax.
As with ISAs, investments can be made either on a “one off” basis or as a regular monthly or annual commitment.
Rather like unit trusts but recognised as a legal entity in their own right and so able to borrow to take more advantageous investment positions. The tax breaks are the same as for unit trusts and OEICS
Investment Bonds are an excellent way of diversifying an investment portfolio and exactly matching a client’s attitude to risk. Money is invested in a lump sum either in a single fund or invested across a range of funds. Funds can be switched without any tax liability if they do not perform as anticipated or client requirements change.
Investment Bonds allow 5% of the original investment to be taken back each year on a tax deferred basis. With regard to capital gains made, only higher rate tax payers would ever suffer a tax charge. A method called top-slicing would be used. Basic, lower rate, and non taxpayers would incur no liability whatsoever, as tax is assumed to have been paid within the investment bond fund itself.
Investment bonds are usually unit-linked investments with transparent performance. With Profit bonds are a variation that were popular up until a few years ago. Any potential clients will need to complete the factfind available on the site in order that their portfolio may be commented on.