outlined:savings & investments

growth, security & providing for the future

An unbiased guide to life events

and making key financial decisions
savings & investments PAGE ONE

What is life:outlined® ?
Every stage of life brings challenges which is why Standard Life has created
life:outlined®, a series of free booklets and website providing unbiased information to
guide you through life events and help you make key financial decisions.
As well as practical hints on everything from parenthood to
Inheritance Tax, the series also offers information and support on
more emotional issues such as divorce or coping with bereavement.

www.lifeoutlined.co.uk

SAVINGS & INVESTMENTS 2 REAL ASSETS 9

Is your money working as hard Should I invest in property? 9
as it should? 2 Equities/shares 10
Equity funds 11
SAVING: EXPECT THE UNEXPECTED 3
How do I choose the right
How do I choose the right account? 3 investment strategy? 11
WHY INVEST? 4 INVESTING FOR THE LONG TERM 12
How long should I invest for? 4 Can I invest for income? 12
How do I invest for growth? 12
WAYS TO INVEST: REGULAR
PAYMENTS OR LUMP SUM? 5 How do I balance risks and rewards? 13
How do monthly payments help me? 5 INVESTING IN A FUND 14
Lump sum investment: how do I
How do I choose a fund? 14
spread the risk? 5
WITH PROFITS INVESTMENT 15
SAVINGS AND INVESTMENT
PLANNING – A QUICK TOUR 6 How does smoothing work? 15

CASH DEPOSITS 7 TAX EFFICIENT INVESTING 16

Bank/Building Society Account 7 Pensions 16
National Savings 7 Children 17
Inheritance Tax 17
BONDS 8 Individual Savings Accounts 18
Gilts 8 Should I take professional advice? 19
Bonds 9 How do I monitor my investments? 19

CONCLUSION 20

USEFUL CONTACTS 21
 savings & investments PAGE TWO

gilts

equitiesISAs Capital Bonds

with profits
ISAs
equities
deposit accounts
National Savings
funds deposit accounts gilts

unitequities
trusts ISAs
with profits
Capital Bonds
IS
equit
deposit accounts
National
funds deposit accoun
SAVINGS & INVESTMENTS unit trusts

Whatever your stage in life, preparing financially

for the future is always a good idea. Whether you’re
saving for a rainy day or investing for a brighter future,
it makes sense to get the most from your money.
Is your money working to investment. All of these factors
as hard as it should? should be taken into account when
planning your financial future.
It would be very easy to leave all your
money in your current account and
This booklet aims to provide
forget about it. An awful lot of people
information on how to get the most
do. But long-term that is unlikely to
from your money, at every stage in
give you the best return on your money.
life. It also explains the wide range
of savings and investments products
Getting the most from your money
that you might want to consider, and
is not quite as simple as it sounds.
points you in the direction of expert
It takes time, and a little thought and
financial advice, should you feel you
planning. There are many ways to
need it. This booklet uses plain
save and invest, and an ever-growing
English wherever possible, but some
number of savings and investment
technical terms are unavoidable.
products to choose from. Selecting
the right ones depends on what you
want from your money, what your
individual circumstances are and what
likes and dislikes you have in relation
savings & investments PAGE THREE

SAVING: EXPECT THE UNEXPECTED

We can all expect rainy days to come along in life,
even though we don’t know when. Putting some
money aside for unforeseen expenses or changes
in circumstances is a sensible precaution.
Whether the ‘emergency’ is minor, How do I choose the
such as needing new parts for your
right account?
car, or major, such as having to take
Bank and building society interest
unpaid leave from work, it’s best
rates vary a great deal. Although
to be prepared.
most savings accounts offer instant
access, some require you to give
As a rough guide, you notice of a withdrawal. Some also
may wish to put aside offer incentives to open an account.
enough money to last you By all means take advantage of these,
but don’t automatically settle for a
for at least three months, poorer interest rate or high charges
and the best place for for the sake of a £50 music token.
such ‘emergency funds’ is Make sure you find the right
account to suit you.
often a bank or building
society instant access
savings account. So if the
worst happens, you can
get your hands on your
money immediately.
 savings & investments PAGE FOUR

WHY INVEST?
We all have goals that we want to achieve in life.
Unfortunately, many of them come with a hefty
price tag. On its own, the interest that you earn on
your savings account is not usually enough to meet
the cost of these long-term plans. Your cherished
ambitions are likely to remain just that.
This is where investment comes in. of risk, and that the value of
Making the right investment now investments can go down as well
could help you turn your dreams as up. We’ll say more about all
into reality. You could pay off your these factors later in this booklet.
mortgage, take early retirement,
provide for your daughter’s wedding, Long-term investments aim to
support your children through provide you with a ‘real’ return
university or college, take a career on your investment, one that beats
break and travel the world or buy the gradual erosion of the purchasing
a place in the sun. Whatever your power of your money through
dream, investing for it now should inflation. This growth can take the
make it much more achievable. form of regular income, long-term
capital growth or a combination
of the two.
How long should I invest for?
You could aim to choose a
Investing is not usually a ‘get rich
combination of savings (put aside
quick’ scheme. You should think of
where you can easily get at them
it as a decision taken for a minimum
in an emergency) and investments.
of five years, and often for longer.
Because of this, you need to think
ahead, considering your circumstances
not just now, but in the future.
You also need to bear in mind that
investment carries a varying degree
savings & investments PAGE FIVE

WAYS TO INVEST: REGULAR PAYMENTS OR LUMP SUM?

Many people are put off investing because they assume
they need a large lump sum to invest. But it is possible,
and sometimes preferable, to invest by making regular
payments of as little as £50 into a fund.
How do monthly However, the more you invest
and the longer you invest for,
payments help me?
the greater the potential return.
Regular payments into an equity fund
So if you can afford to invest a lump
are not only easier for most people,
sum at a time when the market is
they can benefit from the ‘pound cost
rising, you have a distinct advantage
averaging’ effect. Because stock market
over a regular payment investor.
prices may be up one month and
down the next, monthly payments
mean that you will pay an ‘average’
Lump sum investment:
price during the course of the year.
You can also gain a
how do I spread the risk?
better picture of the Getting a large amount of money out
market, which of the blue can be quite overwhelming,
means you are less and it can be tempting to rush out
likely to invest in and spend it all on frivolous things
shares which are which depreciate as soon as they
actually rising leave the shop. If you are lucky
only temporarily enough to receive a windfall, putting
before falling it away in a high interest savings
sharply again. account and ‘sleeping on it’ until you
decide what you really want to do
Regular payments can with it, can often save regrets later.
also be less risky than lump
sum investments: if the
market collapses, payments
can be stopped.
 savings & investments PAGE SIX

Before investing your money, rid of debts is usually a weight off

consider paying off any debts you
may have. Provided that the interest
you pay on loans is more than
the returns you could earn from
investment, this makes clear financial
sense. As well as leaving you with
more disposable income, getting
your mind.
Spreading your money across
different products of varying degrees
of risk generally gives you the best
chance of making your money grow,
whilst retaining a measure of security.

SAVINGS AND INVESTMENT PLANNING – A QUICK TOUR

Before getting down to any serious financial planning,
it is useful to have a working knowledge of the main
types of assets in which you can save or invest.
There are many different types of is an investment vehicle which pools
asset, each with its own particular the money of investors and invests
combination of benefits and it according to a defined set of
drawbacks, but the most important investment objectives. For example,
ones are summarised below. a with profits fund can allow exposure
to all these asset classes, while
The three most popular savings and removing some of the risk involved
investment assets are cash deposits, in the timing of your investment
bonds and real assets such as shares using a process called ‘smoothing’ –
and property. Placing some of your this is explained in more detail later
funds into each of these is often a in this booklet.
good investment strategy, because
it balances security of capital with However, the best option
an opportunity for growth. for you will depend
on your own
As well as buying these assets particular
directly, it is possible to invest in circumstances,
them indirectly through funds which preferences
are managed by professionals. A fund and objectives.
savings & investments PAGE SEVEN

CASH DEPOSITS
Cash deposits (and National Savings) provide security
of capital. But the future pattern of interest rates is
unknown, and their major enemy is inflation.

Bank/Building National Savings Bank Accounts

Society Account
A bank or building society account,
as we have seen, is a good place
to keep some money aside for
emergencies. It offers capital security.
It also gives you regular interest and
easy access, if there is no notice
period, and your money is not at
risk, except from inflation.
National Savings
Another form of cash deposit is
National Savings. National Savings
offers a wide variety of savings and
investment products, all of which are
Government backed. As such, they
are considered to be the most secure
form of investment you can make.
National Savings products offer a
variety of tax concessions. Effectively,
the money you save is used by the
Government in return for a fixed rate
of return and/or tax breaks.
are of two kinds, investment and
ordinary. Investment accounts offer
higher interest, but the first £70 of
each year’s interest on an ordinary
account is tax free. Ordinary accounts
give instant access, while investment
accounts have a 30-day notice
withdrawal period.
National Savings Certificates do not
pay interest, but may be redeemed at
a higher value after an agreed period.
The proceeds are entirely tax free.
If you keep your certificates after the
fixed period, they earn a lower rate
of return, but you still pay no tax on
the proceeds.
National Savings offers several other
products. National Savings Income
Bonds pay a monthly income at a
variable rate. National Savings Capital
Bonds provide a guaranteed rate of
return over a fixed period, which is

added to your capital even though
it is subject to income tax. Another
product provides protection against
inflation by paying a fixed percentage
above inflation. Other products
BONDS
Bonds come in two kinds: gilts, issued by the
Government, and corporate bonds, issued by
companies and local authorities.
When buying a bond you are lending
a sum of money to the issuer for a
fixed period in return for an agreed
rate of interest. In terms of risk and
returns, bonds are ‘halfway house’
products, lying somewhere between
cash deposits and shares. The term
‘fixed interest investment’ is also
used to refer to this type of bond.
Gilts
A gilt is a contract whereby the UK
Government raises money for a fixed
period of time in return for a fixed
rate of interest. At the end of the
contract the loan is repaid, and since
the borrower is the UK Government,
gilts are a very low risk form of
investment. However, although the
risk of borrower default is low, there
are still some risks in investing in gilts.
savings & investments PAGE EIGHT
include a Yearly Plan into which you
can make regular monthly payments,
and a Pensioners’ Guaranteed Income
Bond for investors aged over 65 with
between £500 and £20,000 to invest.
If inflation is higher than expected,
then your return will be worth less
in real terms than expected. If you
choose to sell the gilt before the loan
is repaid, the value you receive on
selling is affected by factors including
interest rates and the demand for
gilts at that time.
Under poor conditions, the sum
you receive may be less than the face
value of the gilt. On the other hand,
rates may be in your favour and the
demand for gilts strong, in which
case you will end up with a greater
sum than you invested.
Despite this uncertainty, gilts are a
popular form of low risk investment
because the UK government has
never failed to reimburse investors
in gilts. You can buy gilts through
a stockbroker.
savings & investments PAGE NINE

Bonds Another way to invest in bonds

is through a bond fund which is
Like gilts, bonds can provide a
managed for you by professional
regular income. They are issued by
investment managers. However,
Governments other than the UK
the bonds invested in by the fund
Government, by local authorities and
may change over time, so the value
by large companies (in which case
of your capital and income may
they are called corporate bonds).
change accordingly.
As with gilts, it is possible to buy
bonds yourself through a stockbroker.

REAL ASSETS
So called ‘real’ assets, such as shares and property, are
those which, judging by past history, are likely to give
a ‘real’ return: the value of your original investment is
likely to grow in line with, or above, the rate of inflation.
Investing in real assets gives you a Should I invest in property?
stake in a business or in the economy
Investing in commercial property
as a whole which you hope is going
through a property fund can be a
to grow in value. All being well, you
sound long-term investment. It can
get a return above the rate of inflation,
provide you with a regular income
so increasing your spending power.
which increases with each rent review,
and the possibility of real growth in
value over time. The risk is that what
happens in the commercial property

market and the economy as a
whole could mean that the value
of your asset could fall.
If you can afford to, you might
choose to invest directly in
commercial or residential property,
renting it out yourself or through
an agency. This can bring in a good
income and, again, your investment
is likely to appreciate over time.
However, having to find the property
to invest in, surveying it, making
the necessary legal and financial
arrangements to buy it, and then
having to deal with tenants, even
indirectly, can be time consuming
and difficult. Bear in mind that you
will also have to account for your
income from letting property, and
pay tax on it. This may involve
paying an accountant as well as
the Inland Revenue.
Equities/shares
Shares, also known as equities,
are the preferred ‘real’ asset for
many investors. Buying shares in
a company provides you with a
portion of the company’s value
and a stake in its profits, which
are distributed yearly or half-yearly
to shareholders as dividends.
Broadly speaking, the value of a
company should keep pace with
inflation because the prices it charges
for goods and services rise with
savings & investments PAGE TEN
+1.95 -1.05 +1.22 -1.01
-12.05
+3.15 -9.25
+10.17
+1.95 -1.05 +1.22
-12.05
-12.05 +6.15
+10.15
+5.15
-8.15+7.15
-1.01
inflation. If you invest in a company
for a long enough time, and if the
company succeeds in growing the
overall value of its business, the value
of its shares may grow faster than
inflation. This can provide you with
substantial capital growth.
Of course, the opposite may happen
and the share value may fall. Investing
in shares always carries a degree of
risk, although as we shall see, there
are various ways to reduce this to
a level you find acceptable.
You can buy shares yourself through
a stockbroker. If you have experience
of a particular industry, you can use
it to your advantage when you make
investment decisions. But deciding
which shares to buy can be difficult
and, once again, time consuming.
You will have to research potential
stocks carefully. You may examine
past performance, and be able to
differentiate between sales growth
and earnings. You must decide
whether to invest in a company that
has low growth at present but which
has great potential for growing in
the future.
Past performance is not necessarily
a guide to future performance.
savings & investments PAGE ELEVEN
You must be sure that the company
you want to invest in has a healthy
balance sheet. And you must be able
to resist the urge to invest in the hot
stock of the moment. Often the ‘next
big thing’ amounts to nothing –
witness the dot.com fiasco of 2000.
Equity funds
Alternatively, you can save yourself
a lot of trouble and invest in an
equity fund (see section on Investing
in a Fund later on page 14). As
the name implies, an equity fund is a
fund managed by professionals, which
invests in a range of equities and,
most importantly, spreads the risk
among all the investors in the fund.
However some funds have high charges,
which could substantially eat into
your returns, so check these out in
advance. And again you must choose
a fund which reflects the degree of
risk you are comfortable with.
Past performance is not necessarily
a guide to future performance.
The stock market can be very volatile
and the value of shares can fall sharply
and suddenly. In the long term, however,
shares are likely to increase in value.
Savings and investment products
come in all shapes and sizes. To find
the best products to suit you, you
need to think about your own unique
circumstances, your investment
preferences and, most importantly,
your investment goals.
How do I choose the right
investment strategy?
Before you invest, you need to consider
your circumstances and how these
may change. If you tie up money in
an investment now, will you need to
have access to it in the next few
years? Are you planning any major
new expenses – like having children,
moving to a larger house, or both?
Ask yourself how much of a risk you
are prepared to take. The longer you
plan to invest, the more risk you can
normally afford to take.
 savings & investments PAGE TWELVE

INVESTING FOR THE LONG TERM

Although shares are a higher risk asset (their value
could go down as well as up), investing in the stock
market for the long term generally gives you a better
return for your money, because any losses you suffer
are usually recouped in time.
So if you are investing on your regular income and a very welcome
children’s behalf, or for your distant supplement to your earnings or
retirement, time is on your side. Over pension. Depending on the amount
10 or 20 years the value of the shares invested it could raise your standard
you hold should be expected to at of living, allow you to take a career
least even out, if not increase. And break or look forward to a more
an amount of compound interest comfortable retirement. Income
can accrue on investments over funds are generally a lower risk than
such a long period of time. growth funds. If you would like to
grow your capital but avoid high
Since the value of shares can rise and risks, this may be possible by
fall quite quickly, you should invest for reinvesting the returns from your
the long term. In practice, the stock income fund in the same fund.
market rises and falls in waves, said
by some to be five-year waves, and
this is why many people advise you How do I invest for growth?
to invest for at least a five-year period. The aim of a growth fund is for the
value of the shares it holds to increase
over time. Investing in this way for
Can I invest for income? five years or more could help you
The aim of an income fund is for it achieve long-term goals such as
to produce a regular income for you. buying a second home, paying for
Investing in an income fund for at a daughter’s wedding, or funding a
least five years can provide you with
savings & investments PAGE THIRTEEN
university education. A well-managed
growth fund may be capable of
financing major life goals beyond
the means of a savings account.
How do I balance risks
and rewards?
Risks and rewards are difficult to
assess with any accuracy, and
investing in any asset involves a
degree of risk. But because there
are so many different savings and
investment products around, with
a little research you are bound to
find a product, or combination of
products, with a risk level you feel
comfortable with.
Investments vary from the very secure
(deposit accounts, as we have seen)
through collective funds (with profits
life funds, unit trusts and investment
trusts) to individual stocks and shares,
property, and specialised investments
such as antiques, artworks and other
collectibles. Even collective funds
can carry a varying degree of risk,
depending on what they invest in
and how they are managed.
The general rule with investment is,
the greater the risk, the greater the
potential reward. Before making any
investment you should consider the
risk and your attitude towards it. This
is a personal matter, and everyone
is different. Some people choose to
invest only in low risk investments,
while others favour higher risk
products that offer the possibility –
and it is only that – of higher returns.
Or you decide on a mixed approach
to risk: for example, investing initially
in low risk investments to give
relatively strong protection for your
capital. With these more secure
investments in place, you could then
use any spare cash to invest in higher
risk products which offer the
possibility of greater returns – in
effect, choosing a balance of lower
and higher risk investments. These
are only sample strategies, however.
The choice is yours, and you should
always consider your options
carefully and, where necessary, take
professional advice before deciding
on your investment approach.

INVESTING IN A FUND
A fund is an investment vehicle which pools the money
of investors and invests it according to a defined set of
investment objectives.
Investing in a managed fund can
avoid some of the problems of buying
shares direct. As well as removing the
research required, funds can invest in
a much wider variety of companies
and assets than you would normally
be able to. This is because the money
contributed by all the investors in the
fund are ‘pooled’ together to buy
collectively and share dealing costs.
This spreads the risk, reduces the
possibility of large losses and can
increase the chances that your
money will grow.
How do I choose a fund?
To help you choose a fund that
suits your particular attitude to risk,
investment funds have a risk rating,
based on the short-term volatility of
the fund – that is, the extent to which
it has gone up and down. These
fluctuations are caused by a range
of factors, including geographic
savings & investments PAGE FOURTEEN
location, the market, the companies
in which the fund invests, the
exchange rate affecting the fund,
and the range of stocks in which
the fund invests. Fluctuations, in
turn, affect the value of the income
or growth you receive from them.
You may want to consider
international funds. Generally
speaking, these carry greater risk
because they are subject to the ups
and downs of the exchange rate.
Also, some invest in the insecure
markets of developing countries.
However, investing internationally
can give your money wider scope
for opportunities to grow.
Investing in a variety of funds is often
the best strategy. Whilst high risk
funds can increase the value of your
investment, any losses you might also
make investing in these funds can
be absorbed by the income or capital
from the low risk funds you invest in.
Past performance is not necessarily
a guide to future performance.
savings & investments PAGE FIFTEEN
WITH PROFITS INVESTMENT
Investing in with profits funds, usually for a set
number of years, can help you spread the risk while
still benefiting from the potentially high returns of
the stock market.
With profits funds usually invest in a
mixture of stocks and shares, property
and other securities, which spreads
the risk. Further, some with profits
funds allow you to share in the
financial performance of the insurance
company. You also benefit from
‘smoothing’* – a technique used by
life companies to help cushion the
ups and downs of the stock market
and so give some protection to
those cashing in their investments
when share prices and returns on
investment are low.
With profits investment doesn’t have
to be for a set number of years –
for example many single premium
with profits investments have no
fixed term. However, with profits
investment, and in particular such
single premium investments, should
be considered as a reasonably long
term option (five years or more).
With profits is available with life
contracts and pensions contracts
(which have different tax regimes),
for both regular and single premium
Past performance is not necessarily
a guide to future performance.
investors. There are many different
types of with profits policies available.
Some offer minimum guarantees on
what the policy will be worth at set
dates in the future. Whether or not
such guarantees are offered, with
profits can be a cost-effective and
reduced-risk method of investing in
assets such as shares, which offer
higher potential returns but with
higher risk.
How does smoothing work?
Smoothing works by supplementing
payouts during periods of poor stock
market returns with gains held back
during periods of high stock market
growth. The effect of smoothing is
that payouts are higher than they would
otherwise have been in times of poor
investment performance because,
in times of very good investment
performance, payouts are not as
high as they would otherwise be.
*In certain circumstances smoothing
may be reduced or removed.
 savings & investments PAGE SIXTEEN

TAX EFFICIENT INVESTING

As an investor it is very important to make the
most of your tax allowances and to choose the
most tax efficient investment products for your
particular circumstances.
There are many ways to maximise Pensions
the tax efficiency of your investments.
Investing in a pension is one of
The following are just some examples;
the most tax-efficient investment
there are many others.
methods you can choose. Within
limits, payments into a Personal
You should take advantage of both
Pension or Stakeholder pension are
income and capital gains tax
free of UK income tax. Effectively,
allowances. Married couples can
the Government contributes to your
decide how best to use their joint
pension by giving you back some of
allowances. For example, if one of the
your tax (because, within limits, your
couple is a non-tax payer, savings and
pension fund contributions are free
investments will give a better return
of tax), with the result that you end
if they are in this person’s name.
up with more in your pension fund
than the amount that you personally
Particular assets and investment
contribute. And with Stakeholder,
products may be subject to different
you get basic tax relief on your
tax rules. Depending on whether
contributions even if you don’t
or not you pay tax, or whether you
pay tax or don’t work.
pay the basic or higher rate, some
products will give you a better
Tax relief may be altered and the value
return than others.
to the investor depends on their
financial circumstances.
savings & investments PAGE SEVENTEEN
Whether you are in a company
pension scheme, a personal pension
or Stakeholder, contributing to a
pension wins you valuable tax breaks.
It is sensible to make the most of
these, bearing in mind what you
can reasonably afford.
The booklet, outlined:pensions,
has more information on pensions
and tax.
Children
A child qualifies for the same personal
tax allowances as an adult, so long as
the money that is saved or invested
for them is from friends, or family
other than their parents. However,
if a parent saves or invests money for
their child and it earns more than
£100 in interest per annum (£200
if the money is from both parents),
the Inland Revenue will treat that
income as if it were the parent’s.
Clearly children are not able to make
investments for themselves, but there
are many ways in which their present
and future needs can be met by
investments made on their behalf.
As well as providing for your children’s
future financial security, by saving
and investing for them you can
teach them, by example, the value
of money and how to save it.
To give your child valuable experience
of handling money and conducting
bank transactions you could set up
a savings account on your child’s
behalf, becoming the trustee of the
account. With your consent, your
child could have control of their
account as early as the age of seven.
Inheritance Tax
If you have a large amount of money
that you plan to pass on to your
children, it is particularly important to
address tax issues sooner rather than
later. Currently any estate worth over
£255,000 is subject to inheritance tax
(IHT) at 40% on everything above
that value (tax year 2003/4). Your
estate includes your house, so at
today’s house prices more and more
people are, potentially, being drawn
into the IHT net. Although IHT is a
complex area, there are several ways
to minimise your exposure and you
should always seek professional advice
on the best way to do this.
 savings & investments PAGE EIGHTEEN

TAX FREE
£7,000
Individual Savings Accounts Tax Free Tax £7,000
Free TAX
Individual Savings Accounts (ISAs) can Tax Free £7,000
£7,000 £7,000
TAX FREE
£7,000
offer major tax efficiencies and give
you a good return on your money.
Tax Free £7,000
TAX FREE
Through an ISA you can invest in
cash, life assurance, equities or other
£7,000
£7,000
£7,000
stock exchange securities, each giving
you a return free of all personal taxes. The Government has stated that ISAs
Although the introduction of ISAs in will be available for ten years from
1999 replaced Personal Equity Plans 1999. You can invest up to £7,000
(PEPs) and Tax Exempt Special Savings tax free in financial years up to 5 April
Accounts (TESSAs), existing PEPs and 2006 (the maximum annual amount
TESSAs continue to be exempt from into cash is £3,000 and life assurance
personal tax. £1,000). After that you can invest up
to £5,000 each year. Obviously,
Until 5 April 2006, if investing through an ISA could make
a substantial difference to your return,
you are a UK resident since the rate of tax on savings is
over the age of 18, any generally 20%, and could be even more
returns you make, no if you are taxed at the higher rate.

matter how large, on

savings of up to £7,000 If you have more than
invested in an ISA will £7,000 to invest, you
be free of personal could put it into ISAs
income and capital over the course of several
gains tax. years to ensure you are
making the most tax
efficient investment
possible.
You may also make payments into
someone else’s ISA. And you do not
have to declare your ISAs on your
tax return.
savings & investments PAGE NINETEEN
You can invest lump sums into an
ISA or make regular payments at any
time. An ISA is also relatively easy to
access. The large variety of ISA funds
available also means you can easily
find a product to suit your level of risk
and the type of investments you wish
to make. To make the most of the tax
advantages of ISAs, it is beneficial to
invest in them at the beginning of
the tax year rather than the end.
ISAs add a tax advantage
to some of the other
types of investment, and
also have the benefit of
being very flexible.
If the amount you invest is liable
to vary from month to month,
an ISA may be an ideal investment
product for you.
Should I take
professional advice?
You may feel you know enough about
savings and investments to make your
own investment decisions. You can
learn a lot from reading the personal
finance pages in the national
newspapers, and from specialist
magazines. But with so many savings
and investment products to choose
from, and with the tax-efficiency
question very much in mind, many
people look for professional guidance
in choosing the right investment
products and strategies for their
particular needs.
Professional financial advisers are
regulated by the Financial Services
Authority (FSA). They are required to
keep their knowledge of the market
and the products they deal in up-to-
date. They aim to give you ‘best
advice’: that is, advice based on a
clear understanding of your needs,
goals and attitude to risk, and which
is judged most likely to satisfy these.
How do I monitor
my investments?
The Internet makes it easy to keep
tabs on the stock market and how
your investment is performing. You
should also be issued with an annual

statement. However, it is important to
make an investment plan and stick to
it, even if your shares do fall in value,
they may well rise again. By all means
keep track of your investments via the
Internet, but before you make any
momentous decisions, consider the
whole picture, not just the minute-
by-minute updates.
The longer you invest for,
the more likely you are to
make money.
Adopting a ‘market timing’ approach
– responding to short term dips in the
value of shares by selling them and
investing in others – may prevent you
from benefiting from the full potential
of your shares.
As well as helping you keep track of
your investments, the Internet may
also make it easier for you to research
investment products and buy shares.
However, the Internet cannot remove
the very difficult decision-making
process necessary to decide the
best products for your particular
circumstances and goals.
savings & investments PAGE TWENTY
CONCLUSION
Getting the most from your money
is important for everyone, whatever
your stage of life. Putting money
aside for emergencies provides peace
of mind, and investing longer term
can go towards providing you with a
more prosperous retirement, provide
funding for your childs education or
simply fulfil your dream of travelling
the world. Careful planning, to suit
your own circumstances and attitude
to risk, is essential. And the sooner
you embark on your plan, the better
the rewards should be. Many people
find the advice of a trusted adviser
extremely valuable.
Many of life’s events are unplanned,
but that does not mean they are
unpredictable. Some careful thought
and action now will help you make
the most of your future, whatever
it may hold.
savings & investments PAGE TWENTY ONE

USEFUL CONTACTS The Financial Services Authority

25 The North Colonnade
Association of Investment Trust Canary Wharf
Companies (AITC) London
Durrant House E14 5HS
8-13 Chiswell Street 0207 676 1000
London www.fsa.gov.uk
EC1Y 4YY Inland Revenue (savings and investments)
0207 282 5555 PO Box 147
www.aitc.co.uk St Austell
The Association of Private Client Cornwall
Investment Managers and Stockbrokers PL25 5FZ
112 Middlesex Street 01752 209600
London www.inlandrevenue.gov.uk
E1 7HY Investment Management Association
0207 247 7080 65 Kingsway
www.apcims.co.uk London
The Financial Ombudsman WC2B 6TD
South Quay Plaza 0207 831 0898
183 Marsh Wall information line: 0208 207 1361
London www.investmentfunds.org.uk
E14 9SR Society of Financial Advisers (SOFA)
0845 080 1800 20 Aldermanbury
www.financial-ombudsman.org.uk London
EC2V 7HY
0208 989 8464
www.sofa.org
 savings & investments PAGE TWENTY TWO

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