What is the difference between Maxi and Mini ISAs?
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The Maxi ISA |
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The Maxi ISA is offered by ISA
plan managers, who must provide the option of investing the
maximum permitted amount which is currently £7,000.
This means that the plan manager must be able to offer stocks
and shares (including unit trusts), and may offer cash and
life assurance elements as well. |
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The Mini ISA |
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Alternatively, the three component
parts of an ISA may be bought separately from different Mini
ISA plan managers. These providers must offer the opportunity
to invest either up to £3,000 in stocks and shares (including
unit trusts), and/or up to £3,000 in cash and/or up
to £1,000 in life assurance. |
ISAs will be available at least until 2009. A Government review
will take place in 2006.
ISAs have an annual investment limit, and if this is not used
in a particular tax year it will be lost forever. In addition,
between April 1999 and April 2004, a 10% tax credit will be
paid on dividends from UK equities.
If the ISA is an equity-based one, its value can reduce due to
stock market movements, although it can also rise. This means
you may not get back all the money you invested.
Levels and bases of, and reliefs from, taxation are subject to
change and any tax reliefs referred to are the current ones and
their value will depend on the circumstances of the individual
investor.
And don't forget, you cannot pay into both a Mini and
a Maxi in the same year.
Can Gilts be considered as a high-risk investment?
Gilts are a form of Government bond and are called gilts because
originally the certificate was edged in gilt. The general view
on risk and gilts is that being Government backed, gilts have
a low investment risk. However, when traded on the stock exchange
prior to their redemption date, the risk element increases.
How am I able to buy and sell Gilts?
Gilts can be purchased either through a stockbroker or directly
through the Bank of England. If purchasing your gilts through
the Bank of England, application forms can be obtained from your
Post Office and forwarded directly to the Bank. The Bank of England
service is only available to non-commercial, private investors.
Both channels of purchase are subject to commission charges, but
the fees payable to the stockbroker will be higher than if you
purchase your gilts via the postal service offered by the Bank
of England. The returns (interest) on gilts is paid gross half
yearly - in other words, you may have to pay tax.
Can Collective Investment Funds cover many 'sectors'?
The investment funds offered by unit trusts, investment trusts
and OEICs can invest in shares, corporate bonds, gilts, deposits
and other investments. Fund managers select the investments they
think will do best and then, by monitoring market conditions,
switch from one to another in order to gain from these fluctuations.
There are a wide variety of Funds:
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Cash |
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These invest in cash based
deposits and are thought of as being low risk and hence may
return modest gains over a number of years. |
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Bonds |
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These invest in 'bonds', which
is the financial markets term generally used to describe publicly
placed borrowing arrangements by companies, Governments etc.
They are thought of as being low to medium risk. |
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General |
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These invest in many types of
investments and as their sectors name suggests may not have
a specific
focus. They are thought of as being medium risk. |
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Tracker Funds |
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These try to mirror and track
a particular index e.g. FTSE 100, Techmark etc. Some tracker
funds actually invest in the same shares as the index they
track. Some invest in 'derivatives' such as options and futures
to mimic the movement of the index they follow. As such, their
risk can vary widely. |
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UK, European, Japan, North America
etc. |
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These funds specialise in investing
in certain geographical areas or specific sectors. As the
funds can cover many different types of investments, their
risk category can vary widely. |
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Ethical |
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These try to invest in assets
that match certain criteria for either being helpful to our
world or those assets that specifically are involved in environmentally
based businesses. The individual funds have differing rules
and as such, their risk can vary widely. |
The above 'sector' names are only a selection of the main ones.
Others include Technology, Smaller Companies, Income, Growth,
Property and Guaranteed/Protected.
Equity-based investments in particular are intended as medium
to long term investments (usually considered to be five years
or more). Because they are equity-based, they are dependent on
stock market movements. It also means your capital is not usually
guaranteed to be safe and so you may lose some or all of it.
If the investment is a unit-linked one, its value can reduce
in direct relation to the stock market prices of its underlying
assets, although it can also rise. This means you may not get
back all the money you invested. If it is a with-profit arrangement,
there is not the same direct link between the underlying assets
and the value of your policy. This is because the insurance
company holds back some profit from good years to offset losses
in poor
ones - this is referred to as smoothing. The provider cannot
withdraw any reversionary bonuses declared, although your early
withdrawal may result in a Market Value Adjustment - effectively
a financial ‘penalty'.
Levels and bases of, and reliefs from, taxation are subject to
change and any tax reliefs referred to are the current ones and
their value will depend on the circumstances of the individual
investor.
What are the Pros and Cons of pooled investments?
The "Pros" of a pooled investment fund are generally:
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A spread of risk
over many different types of assets and different companies. |
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A reduced risk
to the investor compared with having all his or her eggs
in the same basket. |
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Charges associated with running
the funds are shared equally across all investors. |
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Charges are often reduced for
the fund due to the benefits of the size of investments
they make compared with that of an individual investor. |
The "Cons" of a pooled investment fund are generally:
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No control over
the actual charges the fund incurs, such as fund managers
and legal advisers. |
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No control over
the specific investments made by the fund. |
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Voting rights for the companies
in the fund are given up to the fund. |
Equity-based investments in particular are intended as medium
to long term investments (usually considered to be five years
or more). Because they are equity-based, they are dependent on
stock market movements. It also means your capital is not usually
guaranteed to be safe and so you may lose some or all of it.
If the investment is a unit-linked one, its value can reduce
in direct relation to the stock market prices of its underlying
assets, although it can also rise. This means you may not get
back all the money you invested. If it is a with-profit arrangement,
there is not the same direct link between the underlying assets
and the value of your policy. This is because the insurance
company holds back some profit from good years to offset losses
in poor
ones - this is referred to as smoothing. The provider cannot
withdraw any reversionary bonuses declared, although your early
withdrawal may result in a Market Value Adjustment - effectively
a financial ‘penalty'.
| Levels and bases of, and reliefs from, taxation
are subject to change and any tax reliefs referred to are the
current ones and their value will depend on the circumstances
of the individual investor. |
Hedgelands Financial Services Ltd, Hedgelands, Abbotskerswell, Newton
Abbot, TQ12 5PW
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Telephone
0845
165 1280
General Insurance
0845 165 1281
Fax
01626 332622
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