Often, people save for a specific reason and it's usually the safest way to build up a pot of money.
It's less risky than investing, but it offers limited growth. The most you'll earn on the money you save is the interest added. Saving is perfect for people who don't want to take any risks with their money, and most savings accounts have easy access or are for a fixed term.
Saving and investment products are not just ways to increase your wealth; they are essential to protect your wealth. Your money becomes less valuable over time due to inflation. Savings products should be used to maintain or improve your financial situation. Saving is also important to pay off ongoing debts, make big life purchases and enjoy financial freedom.
Capital Investment bonds are life insurance contracts used for the purposes of investment. They are designed to give capital growth and/or income over the medium to long term with access to your money by taking regular or one-off withdrawals. Most bonds are designed for investment over at least five years. If you cash in your investment before that time, you are likely to be charged an early surrender penalty.
Offshore investment vehicles include unit trusts, mutual funds or investment companies. The offshore company will normally be situated in a country where the investment fund pays little or no tax on its income or gains. While this does allow the investor some benefit while invested, if the proceeds are brought back to the UK they will be taxed at that point.
Individual Savings Accounts for children or Junior ISAs were introduced in November 2011 replacing Child Trust Funds. They are long-term, tax-efficient savings accounts for children who
If your child lives outside the UK, they can only open a Junior ISA if you are a Crown servant (for example, you work in the UK's armed forces, diplomatic service or overseas civil service) and the child depends on you for care.
The least risky of investment options are those offered by National Savings, which raises money on behalf of the UK Government.
While investment returns are not exceptional and some involve tying your money up for long periods, they are nevertheless stable and in some cases can be paid tax free.
They include National Savings Bank accounts and various forms of savings and Income Bonds. These savings and investment products are backed by H.M. Treasury, which makes them the most secure cash products available in the UK.
These are life insurance policies that are designed to pay a lump sum after a specific term and pay out a guaranteed sum if the person insured dies within the term of the plan.
Although it is still possible to buy endowments that guarantee the value of the lump sum at maturity, the majority of policies do not guarantee the maturity value - the money that you get back will depend on the value of the investments within the policy.
ISAs represent a tax-efficient container in which to place cash savings and investments in equities, bonds and collectives.
An ISA is available to all UK resident individuals and to Crown servants (for example, those in the UK's armed forces, diplomatic service or overseas civil service) and their spouses or civil partners who are not resident in the UK.
Investing in equities means buying stocks and shares in companies listed on the stock exchange. Historically this brings greater rewards than investing in bank accounts and bonds as you have the possibility of gaining not only a dividend - a proportion of the company's after-tax profits distributed to shareholders - but also a capital appreciation. If the price of the shares goes up after you buy them then – on paper - you have made a capital gain.
With a collective investment, your money is pooled, along with that of other investors, to create a large capital sum. Professional fund managers then use this capital sum to build up a large portfolio of investments. This approach enables you to indirectly hold a wide range of stocks and shares or other investments in a way which would not be practical for the majority of individual investors, whilst reducing the effects on your capital of fluctuations in individual share values.
Unit Trusts are a common type of collective investment.
A unit trust is a large fund of monies and/or investments pooled together and controlled by trustees to gain capital appreciation, income, or both.
Unit Trusts are made up of 'units'. Each unit will have both a buying price and a selling price. The difference in these prices includes the fund management charges. The number of units held, multiplied by the current price, gives the current value of an investor's holding.
An OEIC works in a very similar way to a unit trust except that an OEIC is legally constituted as a limited company (Plc). OEICs have been operating outside the UK for some time, but only since 1997 has it been possible to operate an OEIC in the UK.
OEICs are not trusts and do not therefore have a trustee. Instead, however, they have a depository which holds the securities and has similar duties to a unit trust trustee.
Fixed interest investments is the term used to describe Government and Corporate bonds (which should not be confused with 'investment bonds' which are a kind of life insurance policy).
These kinds of bonds are loans to governments or companies that guarantee to pay the bondholder a specified level of income (called the 'coupon') for a specified period of time. At the end of that time, the bond issuer will repay the capital loaned.
Retirement should be a time to enjoy life, not worry about whether your money will last. That's why cash flow planning is so important—it helps you understand where you stand financially, what you'll need in the future, and how to make your wealth work for you. Whether you're looking to maintain your lifestyle, plan for unexpected expenses, or leave a legacy for your family, a well-structured plan gives you clarity and peace of mind.
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