Investments Capital Growth or Income

Product List

Here is a list of some common investment products and a brief explanation about them. If there are any others that you are interested in please don't hesitate to contact us and we will let you know the best options for you with regards to that particular product.

This page does not contain all of the information required in order to make a decision to invest. You should seek advice, and we are most happy to advise you on the most suitable option for your own circumstance.

Individual Savings Account

By using an ISA you can invest in cash or longer-term investments such as stocks and shares and not pay income tax of capital gains tax on the proceeds (this is why they are called a tax wrapper).

On 6 April 2008 some key changes were made to the ISA rules:

• The annual investment allowance is now £7200. Up to £3600 of that allowance can be saved in cash with one provider. The rest can be invested in stocks and shares with either the same or a different provider. Alternatively that full £7200 could be invested in stocks and shares or any combination of cash and stocks and shares, subject to the cash investment not excessing £3600 and the total amount not exceeding £7200 per year.
• You can invest in two separate ISA's each tax year – a cash ISA and/ or a stocks and shares ISA, subject to the overall limits described above.
• You can transfer money saved in a cash ISA from a previous tax year into a stocks and shares ISA in the current tax year without affecting the ISA allowance for new investment in the current tax year. Transfers can not be made from stocks and shares ISAs to cash ISAs.

Investment in stocks and shares do not have the same degree of capital security as investments in cash.

Unit Trust

A Unit Trust is a collective investment, a way of pooling contributions from lots of people into a single investment fund, which allows a diverse investment across the UK and international stock markets. The volatility and "risk" varies from trust to trust.The more specialised or focused the trust is (to a geographical area, industry sector or size of company), the greater that the potential for fluctuation in the value of the investment.

Income Tax is payable on the dividends (payment to shareholders) from a Unit Trust, whereas any capital gains can be potentially tax-free by utilising the annual capital gains tax allowances. There is no specific term and they can be sold on at anytime, however, due to the volatility of the underlying stocks it may seem sensible to invest for a minimum of between 3 and 5 years. Cashing in the investment in the early years may also mean that the investor receives less than the amount paid in.

Investment Trust

Investment trusts are companies formed with the aim of managing a portfolio of investments. They are closed-end funds which means that they only issue a fixed number of shares which investors can purchase and sell.

Single Premium Bond

A Single Premium Investment Bond is a collective investment, which exists in the "wrapper" of a life assurance policy. Any gains are treated as income in the year of encasement and basic rate tax payers usually have no further tax penalty to pay. A higher rate taxpayer will pay (approximately) the difference between higher rate and basic rate tax. You may withdrawal up to 5% of the original investment each year without any immediate tax liability.

Guaranteed Bond

Guaranteed Bonds are offered by Insurance Companies, and guarantee a fixed income or growth over a fixed term in return for a single premium. Most forms of guaranteed bonds must be considered as investments which are fixed for the term of the contract. Companies that offer them usually charge penalties for redeeming the bond early, in which case the investor may receive less than the initial amount invested.

Investments into guaranteed bonds have very strong protection should anything happen to the company you invest with. There is a minimum and maximum level of investment which can vary depending on the terms and conditions of each Insurance Company.

Annuity

In simple terms an annuity is a type of investment designed to provide an income on terms agreed by the purchaser and the insurer for a set price. From the clients point of view annuities often have many advantages. They are usually as follows:

Annuities are very attractive to many clients. Indeed had the concept of annuities not been designed 200 years ago there is no doubt that a launch today of this new 'annuity fund' would be exceedingly popular. Annuity investments are irreversible, the investment will continue at the terms agreed at the outset and usually, if the customer dies soon after purchasing the annuity, the investment will be costly. Annuities may be linked to stock-market performance and therefore the level of benefits may vary throughout the life of the investment.

FSA recognised Off shore funds

These are a type of collective investment that are based outside the jurisdiction of UK regulators. The FSA recognised funds are permitted to be offered directly to investors in the UK. The FSA accepts that the regulations of these funds is acceptable. Areas that fall into this category include Jersey, Guernsey, Isle of Man and Bermuda.

There are also another type of Offshore funds that are not recognised by the FSA. These are called regulated funds and cannot be offered directly to UK investors.

Offshore funds are not usually covered by the Financial Services Compensation Scheme.

The Financial Services Authority does not regulate taxation and trust advice, will writing, school fees planning and certain off-shore investments.

Further Help

If you have an enquiry on any of the Investments listed and described on this page and would like to know more please don't hesitate on contacting us using the form below, and we will try to get back to you as soon as is possible.

Pace Financial Management are authorised and regulated by the Financial Services Authority