Investment Products

Individual Savings Account, or ISA.

This is a government approved way to save or invest tax efficiently.  You can have a savings account known as a Cash ISA.  You can also invest in the stock market, gilts (government bonds), corporate bonds, and commercial property via investment funds, and also directly with the exception of property.  There is an annual limit to how much you can put in which is £10,200 per person.  If you are between 16-18 you can only hold a cash ISA.  Up to half the allowance can be in a cash ISA with the balance in another Investment ISA, or you can place up to the whole allowance in other Investments.  When funds are withdrawn, there is no tax liability.  ISAs are long term savings vehicles but funds can be withdrawn at any time for most ISA accounts. Advice should be sought to determine which type of ISA is most suitable. 

Personal Pension.

This is another government approved way of saving and investing tax efficiently, this time aimed more specifically at retirement.  Contributions receive tax relief which means that the HMRC make an additional payment at your marginal rate of tax (with annual limits and additional limits for some higher rate taxpayers).  You can invest in most asset classes.  When you decide to retire, you can usually take up to 25% of the value as a tax free lump sum, and income from the rest, which is taxed under income tax rates.  There are several variations such as Stakeholder schemes, and Self Invested Personal Pensions.  Advice should be sought to determine which type of personal pension is most suitable. 

Pension Income and Annuities.

Most retirees purchase an annuity with some or all of the value of their pension funds.  This usually provides for a guaranteed income for life.  You can shop around for the best offer, known as an Open Market Option.  Many options exist including spouse's pensions or guarantees payable if the account holder passes away.  Some retirees don't immediately purchase an annuity, instead they remain invested and draw an income.  The rules around pension income are fairly complicated, and advice is essential to make sure the option chosen is suitable for you.

Investment Bonds.

This is a way of investing in a life assurance wrapper. although there is only a nominal life policy.  Depending on individual circumstances, this type of policy may not be as tax efficient as the above options.  However it can be a useful option for Trusts, and for larger single lump sums.  Again, advice is essential.