Insurance protection worth smiling about.

With-profits

With profits Policies

A with-profits policy is a type of investment fund.

Policies that are with-profits give the insured the extra benefit of a possible bonus that is a share of the profits from the funds that the premiums have been invested in.

How and where the premiums are to be invested is worth establishing if you are going to invest in a with-profits product, such as single premium insurance bonds for example. But as with all long-term investments in the stock market or in interest bearing instruments it is important to stay with them for the long term. That way they have time to build up and "smooth" the short term ups and downs in rates of return. The with-profits endowment policy is also a means of regular long-term saving and has the potential for a good return, but there is no guarantee of the final (maturity) value of the policy.

Some policies may also benefit from terminal bonuses if they are held for their full term. When choosing insurance products for investment it is important to be aware of what charges, fees or commissions may be attached to them and when profits and bonuses are added to the policies. Some, for example, will be heavily weighted with charges at the beginning of their policy life.

Once any bonuses have been added, they cannot normally be taken away. Growth and bonuses cannot be usually guaranteed in advance but any bonuses will be added to your sum insured, bringing a possible investment return over the years of your life insurance policy.

With-profits bonds are usually another way of investing in with-profits funds by paying a single insurance premium.

Market Value Adjustments (MVA) - what are they and how do they affect With-Profit investments?

A Market Value Adjustment (MVA) is a way for the insurer to make sure that the amount of money paid out to an investor is a fair reflection of that investor's share of the with-profits fund, and any growth which has been achieved on the fund. The MVA is used to protect the remaining policyholders with units in that fund.

The adjustment is made via a penalty that may be applied if a customer takes units out of a with-profit fund other than on a pre-agreed date, to take account of investment market conditions at the time.

The operation of the MVA may mean that the value of your investment, if encashed early, could be less than the amount invested.

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What you should know about fixed inccome products.

Fixed Interest

Fixed interest investments are never going to provide the greatest performance, but their appeal lies in the fact that they can provide a comparatively safe haven during troubled times.

Collectives can also invest in Fixed Interest securities such as UK Government Stock, also known as Gilt Edged Stock or "Gilts" for short. These are bonds issued by the government which pay a fixed rate of interest twice a year and are considered safe investments as the government is unlikely to go bust or default on the interest payments. However Gilts, like corporate bonds, are bought and sold on the stock market where their price can fluctuate so you are not guaranteed to get all your capital back under all circumstances.

Corporate Bonds are also regarded as Fixed Interest Securities and this type of product usually has little or no equity content whatsoever. A Corporate Bond invests in high yielding, Sterling denominated, Corporate and Government Bonds and this is essentially a loan which the investor, or bondholder, makes to the Company/Government for a fixed period. In return, the borrower is regularly paying an amount of interest over the life of the Bond. However, this income paid to the bondholder, i.e. you, is not fixed and may fluctuate.

A Corporate Bond (or fixed interest bond) usually carries less risk than equities or Capital Investment Bonds (which invest in equities), but there is still a degree of risk since Fixed Interest Bonds can, and sometimes do, fall in value. Traditionally, all types of Fixed Interest investment have been regarded as a safe option but it is also important to remember that not only do they fluctuate in price but there is a risk to you, the investor, if the Issuer defaults and cannot pay both the interest (coupon) or repay the principal when the Securities mature.

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Giving your savings a boost.

National Savings Products

The least risky of investment options are those offered by National Savings, which raises money on behalf of the UK Government.

While investment returns are not spectacular and some involve tying your money up for long periods of time they are nevertheless stable and in some cases can be paid tax free or paid without deduction of tax (although taxable), which is beneficial if you are a non taxpayer.

They include National Savings Bank accounts and various forms of savings and Income Bonds. These savings and investment products are backed by H.M. Treasury, which makes them the most secure cash products available in the UK.

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Making your money work harder.

Introduction to Savings & Investments

Why Save?

Often, people save for a specific reason and it's usually the safest way to build up a pot of money.

It’s less risky than investing, but it offers limited growth. The most you'll earn on the money you save is the interest added. Saving is perfect for people who don’t want to take any risks with their money, and most savings accounts have easy access or are for a fixed term.

There are many different ways to save, but whichever way you choose, the general idea is the same: to build up some money - savings - that can be used, for example, to make a large purchase such as a new fridge, go on holiday, pay for school fees or cover the cost of expensive times like Christmas.

Savings also provide security by making sure that some money is put aside for emergencies or unexpected costs.

Where Can I Put My Money?

There are a number of different types of savings products out there. The links in this section will provide a guide to what is available to you.

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What's The Difference Between Saving And Investing?

Saving is a stage on the way to investing.

You cannot be an investor without being a saver - but you can be a saver without being an investor.

When someone talks about savings and saving money, it could be referring to a piggy bank on the mantelpiece or a high interest deposit account. Savings are effectively cash or cash instruments, such as deposit accounts, term bonds etc.

Investing is what you can do with the savings you have created - if you are looking to generate a return on your money that is greater than what is already available to you through your savings instruments.

As a saver, you will be taking very few and very small risks with your money.

As an investor you are taking a much greater risk. Not only is the return on offer to you likely not to be fixed or guaranteed, the capital sum you invest may be at risk as well.

So why would anyone want to take such risks? The short answer, of course, is because the potential rewards may be greater and you want to generate more from your money than is possible by simply leaving it in a bank or building society deposit account.

What Should I Do Now?

Since there are so many different types of savings and investments, and there are potential risks with investments in particular, it is wise to seek expert advice which can be tailored to suit your own circumstances.

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Saving for a better and brighter future.

Lifetime ISA

What is a Lifetime ISA?

A Lifetime ISA is a tax-efficient individual savings account with which you can purchase your first home or save for later life – it’s just one of the ways you can save for retirement.

Who is it for?

A Lifetime ISA account can only be opened by 18-39 year olds. You need to be a UK resident to open and continue paying into a Lifetime ISA; the only exceptions are if you are a crown servant or their spouse or civil partner.

How does it work?

You can contribute a maximum of £4,000 every year, until you reach 50 and the government will add a bonus of 25% to what you save (up to £1,000 each year). And you’ll be able to earn interest on this too.

It’s worth noting that the £4,000 limit set counts towards your annual ISA cap, which is set at £20,000 for the 2023/24 tax year.

You are able to choose whether you hold cash or stocks and shares or a combination of each in your Lifetime ISA.

The 25% fee you are charged for withdrawing cash or assets isn’t applicable if you are purchasing your first home, are 60 or over or are terminally ill with under 12 months to live.

On reaching 50, you can no longer pay into the Lifetime ISA or receive the 25% bonus, however your account will remain open and you will still benefit from interest or investment returns on your savings.

How it works if you are buying your first home

If the property costs £450,000 or under, the account has been open for at least 12 months, you are buying with a mortgage and you appoint a solicitor or conveyancer to help you with the purchase, you are able to use your savings to buy your first home without incurring a withdrawal charge.

If you are buying your first home with someone else who also has a Lifetime ISA, they are able to use their savings and bonus from the government too. However, if they aren’t a first time buyer, they would incur the withdrawal charge.

If you own a Help to Buy ISA, you are able to transfer your savings into your Lifetime ISA. Alternatively, you continue saving in both; however, you will only be permitted to use the bonus from one of these savings accounts to buy your first home.

You are able to transfer the balance of your Help to Buy ISA into your Lifetime ISA whenever you wish, as long as the amount isn’t over £4,000.

When you can access your funds if saving for later life

If you are saving for later life, you can access your funds once you’ve reached 60 or over. Taking the savings earlier will result in a 25% fee, as will transferring the Lifetime ISA to another kind of ISA.

Should you die, your Lifetime ISA ends on that date. There are no charges for withdrawing monies or assets from your account.

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