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Investment Products

Selecting which of the available Investment Products you wish to use or consider can be a daunting task.

Whether you have a specific goal in mind, or you simply feel you want your money to work harder for you than it does in the bank, putting money aside and planning for the future allows many people access to valuable options and potential tax benefits that can benefit not only them but also shelter their estate against unnecessary tax bills.

Investment Products

Whatever the reason you have for investing, growth, income, or tax planning, we can provide solutions using investment products that offer flexibility and adaptability so they can change as your situation does.

With the number of investment products continually increasing and the investment limits, allowances, terms and taxation considerations regularly changing, it is vital you seek independent financial advice, before making investment decisions

Please contact us in the first instance to discuss your requirements and the options that may be best suited to your aims and objectives.  Your initial meeting, should we require one will be free of charge.

Below is a quick description of the most common investment vehicles:

Bank Savings

We all require a bank account for our day to day lives, but many also have a savings account which they use to put money aside ‘for a rainy day.’  This is often the first savings vehicle people consider and in many cases is suitable, however once a sufficient rainy day account has been built up, it is usually advisable to spread the remainder over other investment vehicles, as the returns are typically higher.

National Savings

Investment ProductsNational Savings products raise money for the government and offer a range of savings and investment options. These products are predominantly tax-free and offer different investment terms, from 5 years to 15 years, or instant access.

The products are all backed by the government and as a result they are virtually risk free, however the typical returns are also typically towards the lower end of the scale.

Individual Savings Accounts (ISAs)

Across the UK ISAs are one of the most common investment products.  The ISA allowance is reviewed each year and for the 2014/2015 tax year is £11,520.

Up to 100% of this can be invested in an Stocks & Shares ISA, whilst only up to 50% (£5,760) can be invested into a Cash ISA, with the option of investing the remainder up to the full allowance into an Investment ISA.

ISAs are usually the first recommendation for those who have not used their allowance that tax year as the tax treatment of the plans is preferential to the majority of investment options for the majority of people.

Investment ISAs have a wide range of possible underlying investment funds and can invest in the majority of the available collective investments.  Cash ISAs are available with variable or fixed interest rates, however these rates have been falling over the years and are around the lowest they have ever been.

Junior ISAs are available for children up to age 16 who cannot yet contribute to a Cash ISA and can receive up to £3,720 in the 2013/2014 tax year.

If you would like to discuss your options for investing or saving via an ISA, please contact us to arrange a free initial meeting to outline your options.

Investment Bonds (Capital Redemption Bonds)

An Investment bond is a tax efficient investment vehicle that allows investors access to a wide range of options, asset types and funds. Using investment funds allows you to pool your funds with other investors and for them to be managed by specialist, qualified, dedicated, investment fund managers.

The most common advantage of investing in an investment bond is their tax treatment, which allows you to defer your tax liability until you surrender part or all of the investment.  This allows us to ensure the investment is surrendered at a time that is most advantageous in terms of the taxation on the growth of the plan.  In addition to his, for the first 20 years of the plan you are able to receive up to 5% of the initial amount invested as an income, which is tax-free as it is deemed to be a return of your original capital.

There are many other considerations as to whether this type of investment is suitable for you, in particular your earnings level and tax band.  Please contact us to discuss your options and ensure the correct investment products and tax treatments are utilised.

Collective Investments

Collective Investments, like investment bonds, allow your money to be pooled with that of other investors and then the funds are managed by professional fund managers.  This allows investors to invest into equities for the potential returns they offer, whist allowing us to manage the risks involved in investing down to a much lower and appropriate level, through a greater exposure to a greater number of asset types and geographical markets.

There are 3 main types of Collective Investments, which in the investors hands are all subject to the same taxation rules as each other:

  • Unit Trusts

  • Open Ended Investment Companies (OEICs)

  • Investment Trusts


Unit Trusts

A Unit Trust is an open ended investment vehicle, which means that the fund manager creates units and removes units from the fund when money is invested and withdrawn from the fund.

Each unit trust fund is managed with an investment aim, typically to provide income, capital growth, or both through investing in a mixture of assets that the fund manager deems appropriate.  Each fund will also typically invest in a specific group of asset classes and/or geographical areas, to allow investors to manage their risk through diversification.

Open Ended Investment Companies (OEICs)

An Open Ended Investment Company (OEIC) is very similar to a Unit Trust except that each OEIC created is a limited company and investors buy shares in that company (as opposed to units in the fund).

Investment Trusts

Investment trusts are also similar to Unit Trusts and OEICs, however Investment Trusts are companies which are listed on the London Stock Exchange.  Each Investment Trust must be created with its sole purpose to be investing in other companies or investment assets.

Investment Trusts have a greater capacity to borrow money to purchase more underlying investments.  This can allow investors greater opportunity for growth, or expose them to greater risk for losses.

If you are considering investing in collective investments, please contact us to ensure that not only is the most suitable collective investment selected, but that collective investments are the most suitable investment for you.

Offshore Investing

Investment ProductsFor many investors, there can be advantages of holding your money offshore.  The availability of investments based outside of your country of residence (the UK) with an offshore status has continually increased over the last 20 years, in fact it is estimated that over half the worlds investments are based offshore.

Like onshore investing, there are many products available, however these can be very complicated in terms of their taxation, both whilst invested and upon repatriating the money (bringing it back into the UK financial system).

If you are considering the suitability of Offshore Investing, please contact us and we can outline all the necessary considerations and options available to you.

Structured Products

Structured Investment Products are lump sum packaged investment plans that offer investors specific returns based on changes in the  markets, typically the FTSE 100 Index.

Capital at Risk and Capital Protected Products

If the plan is a Capital at Risk plan, as the name implies, your initial investment could be at risk and you may get back less than you invested.

If the plan is a Capital Protected product, then the initial investment is protected by a third party that ensures the original investment will be returned at the end of the investment term.

Growth Plans

Most plans offer a fixed figure of growth at the end of the term based on a specific change in the FTSE 100 Index.  For example a recent popular plan offered the following:

Full return of your original investment (Capital Protected) at the end of a 5 year investment term and if the FTSE 100 Index is the same or higher you receive an additional 32%.

Income Plans

These plans promise an income, typically annually throughout the product term.  The majority of income plans are Capital at Risk and at the end of the term the capital returned may be lower than your initial investment, depending on the relevant index.  For example a recent popular plan offered the following:

An income of 6% of your initial investment each year for five years. If on the last day of the investment term the FTSE 100 has fallen by 50% or more from the level at the start, you lose 1% of your original investment for each 1% that the final index level is below the starting index level.

How the majority of Structured Products work:

  • You invest a lump sum over a fixed term.
  • Your money is split into two parts:
    • Most of the money buys a corporate bond from a counter party – usually an investment bank. The bond promises to pay back an amount large enough to repay all or part of your initial investment at maturity (when the fixed term ends).
    • The rest is invested, again through a counter party, in derivatives to produce either income or growth as promised by the plan.
  • If you choose an income plan, you will receive money every month or year.
  • When the plan matures (ie the fixed term ends) a capital-protected plan aims to at least return your investment. With other products you may lose some or all of your capital if the index your plan was linked to falls below a preset limit. If you have a growth plan you’ll receive some growth if the index has risen.
  • If the counter party providing the capital protection goes bust at any time you could lose all your money. Equally, the returns you receive are dependent on the counter party and will be at risk if the counter party fails.

With many Structured Products, you may not be able to claim through the Financial Services Compensation Scheme.

Direct Equities

Direct Equities, as the name suggests is holding shares in companies directly, as opposed to through investment funds.  This means that the investor holds individual shares of a company which may be extremely volatile.

Investment Products

Shareholders in companies may also have ‘rights’ that come with their shares.  These rights allow them a degree of influence in the running of the companies they hold shares in.  Please note however, unless a significant percentage of a companies’ shares are held, this influence is usually minimal.

Shares are typically seen as one of the highest risk investments as your monies are invested in 1 company and don’t have the advantage of diversification.  Even if a portfolio of shares is held, the majority of investors don’t ‘spread’ their risk through selecting shares in varying geographical locations and investment sectors.  Typically if they have seen a good return in a technology stock, they will put more money into technology holdings.  This is not necessarily a foolish endeavour, it simply means a high percentage of their assets is held in one market sector and if the market goes down they lose a large proportion of their portfolio.

Investment professionals agree that the most consistent way to provide returns on investments, whilst limiting the possibility of substantial losses is to hold a widely diversified portfolio of investment funds managed by different qualified and experienced fund managers.  Utilising strong and proven asset allocation models that match your risk profile allow investors to create a portfolio of assets classes that suits their aims and objectives.

Specialist Income Tax Relief and Tax Deferred Investments

There are many investments that the government have applied special rules in terms of tax to make them more appealing to investors.  Typically the majority of these investments are high risk smaller companies and don’t offer the same protections as many standard investments.

The most common specialist income tax vehicles are as follows

  • Venture Capital Trusts
  • Enterprise Investment Schemes

Each of the above investments allow you to defer income tax into the plans and to avoid tax on gains within the plans up to limits offered by the government and continually changed each tax year.

If you require specialist tax advice about either your existing investment products and/or your income tax from earnings, please get in touch to discuss your options and the suitability of specialist investment products.

Investment Products - Contact UsInvesting can be complicated.  Please contact us with any questions you have about Investment Products or any other financial query and we will ensure we provide you with clear and simple information, as well as helping you select the best products for your needs.