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Savings and Investments

There are a number of reasons why people may wish to save money. Whether it is to fund a deposit for a new home, buy a new car, pay for children to go to school or to simply go on holiday, there are a number of ways in which to save money. It may be the case that money is saved for nothing specific but just to create wealth and financial security for the future. Any accumulated savings or money can be invested for the future so that funds increase in value or are just there for when they are needed at some point in time.

There are a number of products available in order to save and invest for the future and it will depend on an individual’s objectives and requirements as to which plans are most appropriate. Financial advice should be taken in order to look at all the options available and choose the most appropriate products.

All savings and investments made are dependent on the attitude to risk of the investor. This is where the investor can choose whether they want to risk losing some of their money for higher potential investment returns or they do not want to risk losing any of their money whatsoever. Savings and investment products can often be tailored to meet the needs of the investor and each product has a different element to risk depending on what it is intended for. Generally, the higher the investment risk, the higher the potential return, and vice-versa.

Most people are aware that banks and building societies provide ways to save and invest money and offer a variety of different accounts to choose from. These can vary in terms of interest rate, the amount of money invested and whether access to the money at short notice is required or not. Better rates of interest can be gained when notice needs to be given to withdraw the money from the bank or building society. Money invested in bank and building society deposit accounts cannot go down in value and is therefore a safe investment. In the event that a bank suffers financial problems, all investments are covered by the Financial Services Compensation Scheme (FSCS).

National Savings and Investments are schemes offered by the government and provide a number of different products to fulfil different objectives. Some are savings products to accumulate wealth and some investment products to provide growth on existing assets or provide income to the investor. One of the most commonly known products is Premium Bonds where prizes can be made on a monthly basis. National Savings and Investments also offer some tax-free products, children’s savings products, monthly income products and guaranteed growth products. As all of these products are backed by the government, they are totally secure.

Individual Savings Accounts (ISA’s) were introduced in the year 2000 and are a way of making regular savings or investing a lump sum of money in a tax-efficient way. Any growth on ISA’s is tax free and any gains are not subject to capital gains tax (CGT). ISA’s can be made up of cash, where there is low risk or equity based investments such as stocks and shares. Due to the fact that they are tax-efficient savings, there is a limit of how much money can be put in an ISA in any tax year.

Other ways to invest money is through pooled investments or collectives. This is where people purchase units in a fund which comprises of individual investments such as stocks and shares. There are many different types of pooled investment such as unit trusts, investment trusts and open-ended investment companies (OEIC’s). Some investments made through ISA’s are also pooled investments. The tax treatment is slightly different with these types of investment and there are thousands of funds and products to choose from. Therefore making the right decisions on fund choice, investment risk and tax treatment are very important factors to consider.

Qualifying savings policies and investment bonds are other vehicles that can be used for financial planning and there can be much more technical and complicated areas of investment for more sophisticated investors. Advice with many individuals will go into the subjects of discretionary fund management, portfolio planning, and inheritance tax planning. All of these areas are likely to involve financial advice and regular reviews.

The administration of savings and investments is now often managed through a technology platform to give advisers and investors a simpler and more streamlined way of reviewing a portfolio. Platforms can offer up to date valuations of a portfolio and tools to assist with the management and servicing of a number of different investment policies.

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