Investments & Savings

Risk Factors              The investments in a Fund’s portfolio are subject to normal stock market fluctuation and other risk inherent in all investments. There can be no assurance that capital appreciation will occur in the early years as initial charges are levied on your initial investment. You should therefore regard your investment as long term. Some charges (e.g. management fees) may be charged to capital of the Fund. In such circumstances the income and the quoted yield will be boosted but the capital growth will be restrained. The value of investments and the income from them may go down as well as up and an investor may not be able to realise the full amount of the original investment. Quoted yields are illustrative purposes only and are not guaranteed. Past performance is not a guide to future performance.

ISA
ISAs should encourage all adults to save more because of the tax advantages, as gains are tax-free and there is no further tax to pay on income.

There are a number of changes to the ISA rules from 6th April 2008.  The main changes are:

• The overall annual investment limit is increased to £7,200 (up to £3,600 in cash and the balance in stocks and shares or the full amount in stocks and shares);
• Existing PEP and TESSA only ISA (TOISA) accounts will be re-designated as stocks and shares and cash ISAs respectively;
• The distinction between mini and maxi ISAs will be abolished, with all accounts being re-designated as cash accounts and stocks and shares accounts;
• Transfers from the cash component of existing ISAs will be permitted into stocks and shares accounts and will not count against the current year’s subscription;
• Money held in Child Trust Fund (CTF) accounts will be able to roll over into an ISA once the child reaches the age of 18.

These changes provide an opportunity to consolidate PEP and ISA holdings as charges across one simplified ISA wrapper should be lower, delivering benefit for you.  The changes also allow for diversification of assets within the ISA wrapper by transferring some or all cash saved in previous years into equity based funds.

Those who have taken advantage of the maximum subscriptions into cash ISAs over the years (particularly where both spouses have done so) may find that they have a disproportionate amount in cash and subsequently can re-balance their holdings without the loss of the tax wrapper.

CHILD TRUST FUND
This is a guide to Child Trust Funds and is therefore not intended to give advice to individual parents about their personal circumstances.

Parents have been given a twelve months deadline to invest their children’s CTF vouchers. Where parents fail to make a choice, the taxman will select an account from one of the approved providers for the investment. These are mainly the High Street banks and building societies, but parents can switch later.

All children born after September 2002 where parents are in receipt of child benefit have been issued with a £250 voucher. Families on low income may receive a £500 voucher. Only after child benefit is claimed by parents are they sent the information pack and voucher. 2% of eligible families do not claim, so many thousands of children have missed out.

Some parents choose to put the CTF voucher into a Cash Trust Fund, which is simply a tax-free bank or building society savings account. There is no risk to the money and it will continue to grow until the child is aged 18, when the money is available to them, but is not available before. We are all aware that though the money is safe, over the long term, the value of money is eroded by inflation. It does however provide security for the money in times when the stock market is volatile.

The most popular choice is the stakeholder fund. The money buys units in an investment fund which is used to buy various shares. The Annual Management Charge is limited to 1.5% per annum and a fee may be charged for additional contributions. There is no initial fee and when the child is aged 13 the money is moved into less risky investments or cash. The funds provide stock market growth in the early years and gives protection in later years.

Consider tracker funds from the same providers as an alternative, which may be cheaper and there are a wide choice of investment funds.

Parents and grandparents can invest an extra £1200 a year. So consider making a regular contribution. The minimum investment is usually £25 per month. At 18 the fund can be moved into an ISA by your son or daughter.

The government has set up a website www.CTFhelp.com which has a full list of providers. It helps parents make the choice of account for their child. Alternatively, the Child Trust Fund helpline on 0845 302 1470 is available.

If you are considering making additional contributions into Stakeholder or Tracker funds then we can provide advice.

 

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