It can be hard to know where to start with a savings and investment plan - especially if you are looking to find decent returns that will beat inflation. There is also a huge range of diverse products available, so where can you start to make things as easy as possible?
Cash savings
These are the basic 'bread and butter' of savings and are offered through a huge range of institutions, from high street banks through to supermarkets. You can compare different interest rates online to find the best on offer. Instant access accounts will tend to have the lowest interest rates, but you can take your money out freely at any time. Notice accounts will offer more, but will tie you in so that you have to request a withdrawal. Some of these accounts will only allow you a certain number of withdrawals to get the advertised interest rate.
ISAs
Individual Savings Accounts used to be the go-to for savers, but now that basic rate taxpayers can earn up to £1,000 in interest per annum without paying tax, and higher rate taxpayers up to £500, ISAs aren’t the automatic first choice they once were. Additional rate taxpayers do not receive a Personal Savings Allowance. You can put your money into a cash or stocks and shares ISA.
You can subscribe to an ISA every year and the interest on it will always be free from the tax man. You can transfer ISAs to get better rates over the years, but must follow the inter-bank transfer process, so as not to lose your tax-free benefits.
The stock market
This has tended to be the first choice for savings in the longer term, such as pensions. This is because the stock market has traditionally outperformed cash in the longer-term - at least 5 years and ideally more. You can invest in funds, indexes, trackers or individual stocks and shares. It is very important to check the management fees and charges as these can heavily impact on your eventual 'pot'. Because the stock market can be complex, many people will use a financial adviser to help them create the right portfolio, especially for pension savings.
Property and alternative investments
Many long-term investors and savers will also look at other forms of non-cash saving. Property has always been a popular investment. Other investments can be bought in areas as diverse as wine and fine art!
As ever, the trick is to know your savings goals, your timeframes, and your degree of acceptable risk before you begin to put together a portfolio of savings. It is also sensible to first have expensive debts paid off, as you are unlikely to earn more on your savings as you will be paying to service debt. Speak to a financial advisor for quality, tailored advice.
HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.
An ISA is a medium to long term investment, which aims to increase the value of the money you invest for growth or income or both. The value of your investments and any income from them can fall as well as rise. You may not get back the amount you invested.
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