There are lots of different types of savings and financial investments so it is wise to seek advice as to which ones are most suitable for you. Investment is quite often associated with risk. Risk, in turn, is associated with returns. How much are you willing to risk in order to get a suitable return? Or, to put it another way, what return on your investment will suit your individual attitude to risk? Investment can be either an investment of a lump sum or saving on a regular basis. Each individual may have his own reason for wanting to invest. Typically, this could be saving for a specific event such as a daughter's wedding, retirement etc; or it could just be to obtain a potentially better return than is being offered by deposit accounts. Whatever your goals, we will try to find an investment which suits you. As independent financial advisers we can make sure that your capital is working effectively and not simply deferring or creating a future liability to tax or long term care costs. We may also be able to reduce your tax liability now by maximising all available allowances and possibly increase your investment income.

An overview of capital investments

Different ways to invest a lump sum of money:-

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.

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.

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.

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 of onshore UK based life companies bonds. Regular withdrawals from a bond can provide an ‘income’, and providing these do not exceed 5% of the initial single premium over the first 20 years, there will be no tax payable on these amounts at the time of withdrawal.

Other Interesting Facts

• With most investments the value can fluctuate and may go down as well as up.
•  Past performance is no guarantee of future performance.
• Most investments should be held as a medium to long term arrangement and you may not get back the full value of your investment if you encash within the early years.
• The underlying investment funds can be fairly cautious or very speculative and there is a wide range of choice between these two extremes.

The above descriptions have only scratched the surface and there are many ways in which a person can invest, including investment in Gilts and Equities, National Savings, Venture Capital Trusts and Enterprise Investment schemes, for example. Investment can be made either offshore or onshore to suit an individual’s tax situation.

This summary in no way constitutes the complete explanation of investments or how they may suit you. For further details of investments and how these may help your personal circumstances please seek independent financial advice by speaking to Mere Park Financial Services.

The information provided is on the basis of our understanding of UK tax laws and practices and is subject to change.