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Unit Trusts

This type of collective investment, often called a pooled investment, has no limits to the number of units which can be issued. The price reflects the value of the underlying assets of the fund. There are no restrictions on the amounts that can be invested or the number of investments held, nor is there a maturity date.

Open Ended Investment Company Schemes

Similar in some ways to investment trusts, open ended investment company schemes (OEICS) are companies which issue shares. The main difference is that the company is open ended and has no ‘winding up’ date and also there is no restriction on the number of shares which can be issued, which reflect the value of the underlying assets of the fund.

Individual Savings Accounts

From the 1st July 2014 ISA's were simplified and are now known as, the 'New ISA'  (NISA) and all existing ISA accounts will become NISA accounts. The annual subscription limit for tax year 2020-21 is £20,000. Under the new rules, account holders can save the whole allowance in cash, stocks & shares or any combination of the two. 

Junior ISA:

Set up by the Government in November 2011 to replace the Child Trust Fund, the Junior ISA is a tax-efficient savings opportunity designed not only for parents, but to allow family and friends to invest in a child's future.

All UK resident children under the age of 18, who do not have a Child Trust Fund, will be eligible for a Junior ISA.

Junior ISAs share the same tax benefits as a normal adult ISA, but they’re exclusively available to people under the age of 18, They're a great way to invest for a child, for the medium to long term.

A maximum of £9,000 can be contributed to a Junior ISA in the tax-year 2020-21.This can be split between cash and / or stocks & shares providing the total combined investment between the two accounts does not exceed the maximum limit. 

The money in a Junior ISA belongs to the child, but they can’t take the money out until they are 18. They can then decide what they want to do with it. If the child chooses not to take the money out, the Junior ISA will automatically become an adult ISA.

Lifetime ISA

Lifetime ISAs (LISA’s) are a new type of Individual Savings Account available from 6 April 2017 for young people (18 to 39 year olds) to save or invest up to £4,000 p.a. for either the purchase of their first home or for their retirement or both.

Contributions must not exceed the annual allowance and must cease at age 50 - so a maximum of £128,000 in total can be paid into this type of plan. For every £4 paid the government add a £1 so the maximum bonus that could be obtained is £32,000.

Where funds are used for retirement this must not be before age 60. Upon reaching age 60 all funds including the government bonus can be withdrawn without penalty and tax free.

LISA holders may make full or partial withdrawals at any time but if not connected to a first home or retirement the government bonus, earned including any interest or growth on that bonus, will be lost and an additional 5% early withdrawal charge will be levied.

A LISA may be transferred to another provider and it should take no longer than 30 days.

Help to Buy ISA

To help save towards a first home, the government are offering a bonus investment scheme whereby a 25% bonus (capped at £3,000) can be claimed on savings balances above £1,600.

Eligibility criterion to open an account is as follows:

  • Be aged 16 or over and have a National Insurance Number
  • Be resident in the UK
  • Have never been a residential property owner
  • Use the government bonus paid in its entirety towards the purchase of a property of not more than £250,000 outside London or £450,000 inside London
  • The property must be the main residence and be purchased with a mortgage
  • Contributions must not exceed the ISA allowances
  • Not have an another active Cash ISA in the same tax year
  • Have not previously received a payment of a bonus amount under a Help to Buy ISA
  • Complete an Eligible Customer Declaration

The Help to Buy ISA must be cash based and the accounts are available to each first time buyer, not each household. Savings of up to £200 a month can be made in addition to an initial deposit of up to £1,200. Applying for the bonus must be undertaken by a solicitor or conveyancer. 

ISA transfers

Once an investor has chosen an ISA provider or a particular fund, there is no reason why this cannot be transferred to another provider and fund at a later date. This may involve a charge with some providers.

Insurance Bonds

Insurance bonds are, in fact, a form of life assurance which have a nominal death benefit, usually only 101% of the value of the fund. They are usually without a fixed term and the investment funds can be diversified between a number of funds and usually can be changed during the life of the bond. Basic rate tax is deemed to have been paid on the funds. Regular withdrawals from a bond can provide an ‘income’, and providing these do not exceed 5% each year (until the initial value has been exhausted), there will be no immediate tax liability on the income.

Offshore Bonds

Offshore life products can be used for income tax deferral, as a capital gains tax shelter, and for inheritance tax mitigation, as can onshore life bond. However, the offshore variety may offer advantages for certain investers depending on their personal circumstances and tax status.

The primary advantage over the onshore life products is its tax efficient nature. Interest on deposits and many fixed interest investments is paid gross; dividends on equity holdings are similarly received gross, although with-holding tax may be deducted depending on the source of the dividend; and capital gains roll up gross within investment funds. Upon encashment any gain made will be liable to income tax if you are a UK resident.

These vehicles can be very attractive to both expatriates and residents of the United Kingdom.

Please note: Not all Offshore plans are regulated by the Financial Conduct Authority.

Investment Trusts

Investment trusts are, in fact, companies which issue a specific number of shares. The price of the shares is determined by the demand and may be more or less than the value of the underlying assets of the fund. Many Investment Trust companies will have a fixed ‘winding up’ date, but there is no restriction on the amount that can be invested or the number of investments which can be held.

This summary in no way constitutes a complete explanation of the investment products detailed above, or how they may suit you. For further details of investment plans and how these may help your personal circumstances please seek independent financial advice.

The Financial Conduct Authority does not regulate taxation advice.

The value of investments can fall as well as rise and you may not get back the original amount invested

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