Savings and Investments Guide

Savings and

Investments

Welcome to…Savings and

Investments

Here you can read topics that will help you make the most of your

money within savings and investments.

Big or small savings and investments will hopefully have been a part

of your life since you were young. Within this brochure we will

discuss most savings, some of which you will probably already have

heard of and give you some helpful hints and tips if you are thinking

about investing.

We will help guide you through the process of savings, investments

and getting your money on track.

There is a wealth of further information available to you which talks

about the many different topics highlighted here. (You can find this

information on our website; www.beaconwealthmanagement.co.uk)

If you would like a complimentary first meeting, with one of our

advisers, you can find our details on page 17.

T: 01480 869466 | E: [email protected]

The content in this publication is for general information and use only and is not intended to address your particular

requirements. They should not be relied upon in their entirety and shall not be deemed to be, or constitute, advice.

Although endeavours have been made to provide accurate and timely information, there can be no guarantee that

such information is accurate as of the date it is received or that it will continue to be accurate in the future. No

individual or company should act upon the information without receiving appropriate professional advice through

examination of their particular situation. We cannot accept responsibility for any lose as a result of acts or omissions

taken in respect of any articles. Mortgages are not regulated by the Financial Conduct Authority (FCA). Your home

maybe repossessed if you do not keep up repayments on your mortgage. The value of your investments can go up as

well as down.

Contents

Savings and Investments:

1. Introduction to Savings

and Investments

2. Things You Need To

Know

a. Safety

b. Fee Breakdown

3. Structured Deposits and

Investment Products

4. Regular Savings

Accounts

5. Savings Bonds

6. ISAs Explained

Investments

7. Shares Explained

8. Pooled Investment

Funds

9. With-Profits Fund

10. Investment Trust

11. Investment Bonds

12. Property Investment

13. Ethical and Sustainable

Investments

14. What To Do Next?

Contact Us

Beacon Wealth Management Ltd

voted the best independent financial

advisers of the year, in the East of

England 2013.


http://www.beaconwealthmanagement.co.uk/

http://www.beaconwealthmanagement.co.uk/contact/

We understand that you want your money to work hard for you. We also know how

confusing the world of investing can be with everyone seeming to offer the same, but very

different, products.

New to saving

As with any investment, it is always a good idea to create a plan before you start researching

different investment types. See the checklist below as to how to set out your plan. It does not

matter if it is £1 or £10,000, as saving is always better than keeping money hidden away.

Once you know where your money is, it is easier to narrow down your search for savings and

investment accounts that will suit your criteria.

Already saving

If you already have savings and investments, still read on as these could be maturing and you

may need to switch providers to get a better deal. Also your needs may have changed and

you may feel you can contribute more each month, so it may be beneficial to enter into a

higher interest account to make your extra cash work harder for you. See the checklist below

to set out your current investments.

Investments are constantly changing, therefore it is a good idea to keep ahead of what is

happening compared to different providers. You may feel that you would like to take

more/less risk with your money and therefore you will need to change the types of

investments you put your funds into.

Introduction to Savings and Investments

Checklist

Already saving:

Make a detailed plan of:

□ Income

□ Expenditure

□ Savings and Investments

□ Contributions

□ Dates of when fixed terms

end

Checklist

New to saving:

□ What are you saving for?

□ When will you need the funds?

□ How much can you afford to save?

□ Decide on your risk tolerance

□ Do you have money available for emergencies?



Savings and investments can seem

somewhat of a scary place to enter, if you

have not had dealings with them before.

As with most savings and investments

there is some form of risk. The risk will

depend on:

- How much money you invest

- What you invest in

- The length of term

- Restrictions on the product/policy

- The amount of information you

receive about the product

The risk will vary from policy to provider,

but you MUST be aware of the amount of

risk you are taking before you choose to

save or invest your money.

How safe are your savings and

investments?

Terms and conditions from the provider

should provide a section on safety/

protection, and what will happen to your

savings if the provider were to liquefy.

As long as your money is in a UK-

regulated bank or building society

account, it should be protected under the

Financial Services Compensation Scheme

(FSCS). This entitles you to be covered for

a maximum per person, per financial

institution.

For those who have more than the limit to

save, it is a good idea to spread your

money out across different institutions;

this way your money is protected and you

are covered for the maximum sum.

As well as savings, some investments are

also covered under the FSCS; this is why it

is vital to read through all terms and

conditions before entering into a policy.

If you are unsure, an Independent

Financial Adviser will be able to tell you if

your money is protected.

Fee Breakdown

As with any investments (and some savings), there

are charges:

- Initial charge/Entrance/Opening fee -

Investing or opening a new account for the

first time

- Commission/Flat rate fee – Charged as and

when the service processes that trade

(mainly charged on shares)

- Annual management charges – To check

whether your money is performing and

communicate this with you

- Exit fees – May occur when withdrawing your

investment before the term end

NOTE: These charges are subject to each provider’s

terms and conditions, so be vigilant and check before

entering into an agreement.

Things You Need To Know



To understand savings and investments

products, you need to know certain terms

that are used to group savings and

investments under different headings.

Structured products tie up your money

for a set time and are designed to give you

income and/or growth. These products

can be quite complex, so it is wise to

research your provider fully or seek

professional independent advice.

Structured deposits are savings accounts

that are offered by banks and building

societies, where the rate of interest you

receive depends on how the stock market

and other measures of index perform.

Usually, the money you invest has the

same protection as you would get with

other savings accounts under the FSCS.

Structured investments are slightly

different and are commonly offered by

banks and insurance companies. The

money you invest will buy two underlying

investments, one of which is to protect

your capital and the other is to provide

you with a lump sum during or at the end

of the term.

These structured investments and

deposits are also called:

- Protected investment funds

- Guaranteed stock market bonds

- Growth deposit plans

- Guaranteed capital plans

- Structured cash ISAs

- Guaranteed income bonds

- Guaranteed equity bonds

‘Guarantee’ does not necessarily mean

that everything you invest will produce a

return. You are only ‘guaranteed’ to get

the returns offered if the

index/investments perform as stated in

the products terms and conditions.

Often, charges can affect the amount you

receive when the plan matures as they are

usually included within the product. That

is why it is so important to check the

terms and conditions of each policy and

provider. An Independent Financial

Adviser would do this for you.

Structured Deposits and Investment Products



Instant and easy access savings accounts

These accounts are an easy way to start

saving your money. Usually they will not

charge you to deposit or withdraw money,

and the interest rates are often slightly

higher than normal current accounts.

Most of these accounts can be opened

with a deposit from as little as £1 and it

will enable you to save at your own pace,

when you can afford it.

Low risk

The money you save is not locked in over

long periods of time and is always

accessible depending on your provider.

Monthly saver / Regular savings accounts

Monthly and regular savings accounts are

slightly different to the instant access

accounts. You agree to save a set amount

each month. These are perfect to get into

a regular habit of saving and will

ultimately help you reach a specific goal

much more quickly.

They also help spread your savings over a

period of time, which means you will not

have to invest a huge lump sum, this may

suit your income and expenditure better.

Regular Savings Accounts

With most providers you are expected to save

between £10 and £500 a month with continual

payments over the year(s). For this reason, you

may be receiving a higher interest rate as the

provider guarantees your money over one, two

or three years plus.

Another important fact to remember, is that

when the fixed term ends on your savings

account, it will probably be transferred to a low

interest account and will not continue to receive

the higher interest rates previously experienced.

This is the time to consider switching providers.

Include the date your account matures into your

plan, so you can keep track of when you need to

start looking or seeking advice.

Most accounts of this type will have set

conditions on charges. Usually there are not any

charges for opening the account but you may

incur a penalty (sometimes a decrease in

interest earned for that term) if the money is

withdrawn earlier than the agreed date to end

the payments.

Some providers will allow a set amount of

withdrawals over the term. Check with your

provider for full terms and conditions.



Saving bonds

Saving bonds are suitable for people that have £2000 -

£500,000 to invest. Your money will be locked into a bond

from 6 months – 5 years and the providers usually do not

allow withdrawals.

The interest rates are significantly higher than other savings

accounts and you should also be given a structured

breakdown of how much you will receive when the bond

matures.

Tracker bonds

A Tracker bond is a slightly different type of savings bond;

interest rates will fluctuate depending on the base rate. You

will take the risk of receiving a lower amount than you

invested when the bond matures due to the fluctuation of

these rates.

Savings Bonds



About ISAs

Individual Savings Accounts (ISAs) are a great

way to save, tax-free, and are open to

most people with as little as £1 to start

saving.

ISAs work the same as regular savings

accounts; there are limits as to how much

you can put into an ISA over the financial

year (April-April), limits are regulated by

HM Revenue and Customs.

Fixed ISAs

Fixed ISAs offer slightly better interest

rates as your money is tied in over a

period of time (often a one to five year

period), and some providers do not accept

withdrawals without incurring high

penalties.

Cash ISAs

Cash ISAs are an easy saving solution.

They can be opened with as little as £1

and many offer unlimited withdrawals

without incurring penalties. It is always a

good idea to shop around for the best

deals.

Make sure before you agree to any set

conditions that you know what you can

afford to save; this is where your plan will

come in. If you are not sure whether you

will need the money at a later date, it may

be better for you to opt for an ISA that has

unlimited or set withdrawals so that you

do not face penalties when accessing your

funds.

The Facts

ISAs are very easy to keep track of, usually

via the internet or in branch. Many ISAs

will allow you to withdraw a certain

amount of money, a set amount of times.

There is very low risk with ISAs and the

interest rate is usually better than a

standard current account.

Interest rates for ISAs are usually quite

competitive as most banks and financial

companies will offer different types of

ISAs depending on your needs. Usually

when you open a new account you will

receive an introductory interest rate for a

certain period of time. However, be aware

when these run out your money will roll

over into a regular savings account until

you choose to reinvest your money.

Not only can ISAs be used to store cash,

they can also be used for stocks and

shares. These can be placed within an ISA

which holds some key advantages.

Benefits of Stocks and Shares ISA:

- Any profits earned from the shares

are not liable for capital gains tax

- The full amount of the stocks and

shares can be reclaimed

(depending on what stocks and

shares are owned)

ISAs Explained



Cash ISAs VS Stocks and Shares ISAs

The question stands: should you use your

allowance for cash or stocks and shares? If

you have been toying with this decision,

here are a few helpful tips to get you

started:

- You can have both a cash and a

stocks and shares ISA at the same

time

- Limits are set on both of these per

financial year

Transferring your ISA

Not all providers allow you to transfer

your ISA to another provider and some do

incur penalties. Always check with your

provider

Junior ISAs

Junior ISAs were introduced to replace the

Child Trust Fund. They are much the same

as adult ISAs but they allow a parent or

relative to save on behalf of their children.

Junior ISAs usually offer a higher interest

rate than normal ISAs as the terms are

often longer and the plan will mature at a

set age (e.g. at the age of 16).

It enables parents to make sure their

children have tax-free savings in a bank

account which will help them in the future

when they want to start saving

independently. Hopefully, it will also give

them an early start in understanding

savings and investments.

Fees

Some providers may charge an initial

opening fee and penalties if you withdraw

money earlier than planned. Always check

with your provider. It is worth doing your

research and shopping around for the

best deals.



What are Shares?

Shares (also known as equities) are like

tiny parts of a company; if you own one,

you will hold a little bit of the company

and a proportion of the company’s value.

How they work

You can own shares yourself or you can

pool your money with other people in a

collective investment (pooled investment

funds).

Owning a share directly makes you a

shareholder, which can mean that you

have the right to vote on some company

decisions. This however, does not happen

if you invest within a fund.

Most shares are bought and sold on the

stock exchange. Listed shares are traded

on the London Stock Exchange, often for

big companies. Other smaller companies

are traded on an Alternative Investments

Market (AIM).

Earning money from shares is not as

complicated as it may seem:

- If the company grows and

becomes more valuable, your

share will essentially be worth

more (so will your investment)

- Some shares will allow you to be

paid part of the company’s profits.

This is called a dividend; you may

pay tax on this if you are liable

As with most investments, the value of

the share will fluctuate. This means when

the company value increases your share

will be worth more. Likewise, if the

company value decreases, your share will

be worth less.

It is a good idea to have your shares

spread across different companies, so that

your money is not vulnerable to the

changes in just one company - potentially

avoiding huge losses.

Investments

Shares Explained



Pooled Investment funds

These are group investments, often for

people who want to invest in stocks and

shares but do not have the time to

research all products themselves. There

are a variety of pooled investment funds.

We have selected a few to discuss.

Open Ended Investment Companies

(OEICS) and Unit Trusts

A fund manager will take all the

investments into one pot and invest it in

the fund’s underlying assets. The overall

fund will fluctuate depending on the

buying and selling of shares within the

OEIC or Unit trust. You will own a share of

the grouped fund and will see the return

dependent on the fluctuation of interest

rates.

Criteria for funds like these are:

- You want to invest in shares but do

not necessarily have the time to

sift through all the shares on offer

- You appreciate that you may get

back less than what you invested

due to the nature of buying and

selling.

- You can save at least £25 a month

and have a minimum lump sum to

invest of £500 (although these

figures can alter depending on the

fund type)

Safety/Protection

Your investment is usually protected

under the FSCS up to a certain limit per

person; this will depend on the terms and

conditions of the shares.

Some funds are riskier than others. Be

sure to check this with your provider.

Ethical Investing

Ethical investments cater for the ethically

savvy investors; the fund manager can

pick and choose where they invest your

money, depending on an ethical criteria.

If you have specific ideas of where you

want your money to go on an ethical

basis, add it to your plan; you can check

with your adviser or the provider to see if

they do offer this service. More

information on ethical investing can be

found on page 16.

Fees

As with any investments, there are

charges (shown in the Fee Breakdown

section on page 3).

Pooled Investment Funds



About With-Profits funds

With-profits funds are not that well

known compared to a lot of other

investment funds. These funds are usually

offered when you set up an endowment

policy, an investment bond and/or a

whole-of-life policy. These are usually for

money you do not need to access for a

long period of time, as there are large

penalties for withdrawing your money

early.

The Facts

As a type of pooled investment fund, it

works much the same as an OEIC or unit

trust in that:

- The money you invest is pooled

together with money from other

people

- This would be managed by an

investment manager

- You own a share, therefore, a

share of the profits is given to you

The difference is that it is invested in a

specific insurance company’s with-profits

fund, whereas normally it could be any

number of companies your money is

invested in.

The costs of running the insurance

company’s business are deducted from

the fund, and whatever is left over is

available to be paid to the with-profits

investors.

Some companies offer bonuses

throughout the time your money is

invested (also known as a ‘terminal

bonus’). As with most investment funds,

the amount of profit you earn depends on

the amount you have invested.

With-Profits Fund



About Investment Trusts

An investment trust is a company that

raises money by selling shares to investors

and then, as with most pooled

investments, will group that money

together to buy and sell a wide range of

shares and assets.

Different investment trusts will have

different aims and a mix of investment

types.

Criteria

These investments are usually for people

who want a potentially higher return than

from a Unit Trust or OEIC and are willing

to take more risk.

However, these investments will fluctuate

and your money is usually tied up for

more than five years, which for some is a

scary prospect, but it could allow you to

access the higher returns.

How it works

The difference with investment trusts is

that they can borrow money to actually

buy shares. This gives the investment an

edge on most other funds. It also has

extra buying potential which could

increase the gains when the markets are

increasing, but the investment could

suffer significantly when the markets are

falling.

You cannot technically withdraw your

funds from this investment; you must find

somebody else to buy your shares from

you. Although it does not have to be

someone you know, this can be done by

selling them on the stock market.

Unlike the OEICS, investment trusts

distribute a fixed number of shares. After

this they are closed to new investors.

Again, with any investment, the risk you

take is dependent on your tolerance to

the fluctuating markets. Also the fees

charged are similar to the other

investments (found on page 3).

Investment Trust



Investment bonds are very similar to

savings bonds; you invest a lump sum

usually £5,000+ and you tie up your

money for at least five years.

The majority of these bonds are whole of

life, meaning there is no minimum term

but surrender penalties may apply in the

early years of opening your account. At

surrender or on death, a lump sum will be

paid out. If the investment is not a whole

of life bond, this would happen at the end

of the term.

These bonds will usually offer a better

return than a standard savings account,

but as with any investment, there is the

risk that you will get back less than what

you paid in.

In terms of withdrawals, providers will

sometimes allow you to withdraw some of

your money without incurring penalties.

Charges will often occur with investments

of this type. Check with your provider so

you know if you are paying any charges up

front and what you could incur over the

term of your investment.

Investment bonds are also known as an

array of different terms: insurance bonds,

with-profits bonds, unit-linked bonds and

single premium bonds.

Endowment policies:

Usually they are set up as regular savings

and at the end of the term will pay out a

lump sum. The policy will include life

assurance, so it will pay out if you die

during the term. These policies are aimed

at people who want to save for a specific

goal or event for usually around 10 years.

How they work

They work by paying in a contribution

monthly; part of the payment is used to

buy life protection, and the other part is

invested in a with-profits or unit-linked

basis (pooled investments). The lump sum

then correlates with how well your

investments have performed over the

term.

With all investments there is the risk that

the value of the investment will fluctuate

and you may experience a decrease in the

value of your investment. There is also

little access to your money throughout

the term as they are generally whole-of-

life policies.

Some charges are incurred and this is

usually based around administration

charges which may be incorporated into

an entrance fee.

Investment Bonds

Whole-of-life policies:

- Monthly/Annual payments into certain investments that will continue until a certain age or death

- A lump sum is paid out upon the end of the term; this payment will be distributed among your

specified trustees or beneficiaries (if your policy is written in trust)

- Your money will be tied up for life or an age you specify (for instance, upon retirement)

- Guaranteed pay out on death

- Some providers will offer you the chance to add insurance against critical illness and other health

related insurances



Returns from property investment will be

in the form of rent or selling the house

once you have improved it and increased

its value.

Indirect property investment is a way of

investing in property markets without

actually having to buy a house or flat

yourself, and will usually allow you to

commit to a long-term investment. The

investment will fluctuate dependent on

the market at the time. There are several

types of indirect property investment:

Real Estate Investment trusts (REITS)

- A REIT is a property investment

company that will be listed on a

certain stock exchange that owns

and manages property on behalf of

shareholders

- Both residential and commercial

properties can be invested in via a

REIT

- You invest in these by buying

shares in a REIT. If the investment

does well, you will receive a

proportion of the profits

- For tax purposes, a REIT has two

separate elements; a ring-fenced

property letting business is exempt

from corporation tax and non-ring-

fenced activities like property

management services are not

exempt

- Payments from the ring-fenced

properties (tax-exempt element)

are treated as UK property income

for the investor and are paid net of

basic rate tax (non-taxpayers can

re-claim this). Payments from the

non-ring-fenced properties (non-

tax-exempt) are treated the same

as any UK dividend and paid with a

tax credit

A positive aspect of a REIT is that, it

pays less corporation tax and

therefore may be able to return more

profit to investors. You can also

include a REIT in an ISA up to your

annual limit.

The only drawback with this type of

investment is that listed property

companies are not subject to direct

supervision by the FCA, which means

your investment is not protected

under their rules and regulations.

Property Investment



Ethical/Sustainable investments

Sometimes it is difficult to understand

where your money actually goes once it

is invested. Something you will need to

ask yourself if you do make an

investment is whether they are ethical

or sustainable. This would mean you

want to invest in companies that have a

positive contribution to the social

environment and avoid companies that

have a negative effect on society.

How they work

Many ethical funds have a panel or

committee responsible for setting the

criteria and establishing an approved list

of companies from which the portfolio

manager can select investments. Most

ethical funds are invested mainly in

shares; therefore the investment should

be for a period of at least one to ten

years. Also, some funds will be higher

risk than others and their performance

is still reliant on good investment

management techniques.

There are an array of investments that

qualify for ethical status. This will vary

between investment products and

providers.

Ethical and Sustainable Investments

Most providers will have a set portfolio

as to what they do and do not invest in.

This basically means your money, whilst

hopefully giving you a return, is not

being invested into companies that

fund foreign wars or unauthorised illicit

activities. There are a whole host of

areas that certain fund managers will

not invest in such as companies that are

associated with animal cruelty,

gambling, and animal testing (to name

just a few).

This is a relatively new specification that

investors have put on fund managers,

enabling investments to become more

ethical and informing investors where

their money ends up.

A portfolio manager would set out

certain criteria to which portfolio they

should be allocated, based on an ethical

investment questionnaire. There are

specific ethical portfolios so that clients

know that their money is being invested

sustainably. If this is something you

would consider, it is always best to

speak to an Independent Financial

Adviser.



Do have a look around yourself. As with

many financial products, providers are

quite open with what they will offer and

for how long. A lot of the time it is a

lengthy process sifting through financial

jargon before you get down to what the

actual product is offering.

Ideally, it would be a good idea to

contact a Financial Adviser who is

independent and will have access to the

‘whole market’. This means they could

find you deals and providers that you

may not have access to on the open

public market.

Start planning now to get the most out

of your money. Beacon Wealth

Management are Independent and

Chartered Financial Advisers.

Contact us for a free initial

meeting

What To Do Next?



About Us

Meet The Team

Tony Larkins APFS Chartered &

Certified Financial Planner.

(Managing Director)

Specialising in personal and

corporate financial planning as well

as Pensions and Investments

[email protected]

Adrian Banks Dip.PFS, Cert CII (ER & MP) SOLLA & Independent Financial Adviser

Specialising in long term care and

financial planning for later life clients

[email protected]

Chris Wills Dip.CII Independent Financial Adviser

..

Specialising in financial planning

..

[email protected]

Martin Eaton BSc, CEFA, CeMAP Independent Mortgage and General

Insurance Adviser

Specialising in mortgage and general

insurance

[email protected]

Mark Graddage Cert PFS, Cert CII (MP) Business Support Manager

………………………….

Specialising in mortgage and general

insurance

[email protected]


mailto:[email protected]






Beacon Wealth Management Ltd Chartered Financial Planners

The Old Chapel Thrapston Road

Kimbolton Cambridgeshire

PE28 0HW

T: 01480 869466

F: 01480 869477

[email protected]

www.beaconwealthmanagement.co.uk

Authorised and Regulated by Financial Conduct Authority. Registered in England and Wales No.526604



http://www.beaconwealthmanagement.co.uk/


Documents

Savings and Investments Guide