long-term savings for the future

Long-term savings will help for more expensive things such as funding your retirement, saving for a house deposit or saving for your children’s university fees.

If you are saving over a long period, and want to get the best possible growth, you may want to consider investing your money. However, remember that with many types of investment, you have to give notice before getting access to the money that you have saved.

Ways in which you can invest your money:

Individual Savings Accounts (ISAs)

Why do I want one?

Tax free interest and capital gains. There is no minimum ‘lock in’ period. You may cash in your ISA at any time. An ISA may include any combination of cash, stocks and shares, unit trusts, life assurance and National Savings.

Any disadvantages?

At the moment you may only invest up to £7,200 per year out of which up to £3,600 may be in the form of cash deposits (i.e. in a bank or building society account). A tax year runs from 6th April to 5th April the following year. However from October 2009 the limit will be raised for savers over 50, who will be allowed to save £10,200 a year in an ISA, or which £5,100 can be saved in cash. From April 2010 this limit will be extended to all savers, whatever their age.

How do I find out more?

You will need to search the market place for the best offers. Many newspapers give tips for the best accounts. Many Internet sites give details and package ISA accounts for you.

Pensions

The government encourages people to provide for their retirement by giving tax incentives to the premiums paid.

Why do I need one?

The state pension is likely to fall behind real needs over the coming years. You need to have a private pension scheme to enjoy a satisfying retirement. The premiums attract full tax relief at the top marginal rate of income tax to which the person paying the premium is liable.

Any disadvantages?

They are locked up until you retire – the earliest age is 50.

How do I find out more information?

An independent financial advisor can help you get the best pension to suit your needs and your pocket. See www.unbiased.co.uk.

National Savings Certificates

The interest and index linking increases on National Savings Certificates (both fixed interest and index linked) are exempt from income tax and capital gains tax.

Why do I want one?

They are guaranteed by the government and give guaranteed returns.

Any disadvantages?

They do not give interest every year, only when the certificates mature.

How do I find out more?

Via the National Savings web site or application forms at post offices.

Employee share schemes

These are schemes designed to encourage employee loyalty. The schemes reward employees when, as a result of their work, the company performs well. They allow employees to save regularly and buy shares in the company at a discounted rate.

Why do I need one?

These schemes encourage you to work hard for the benefit of your company and for your own benefit. The gains on the shares are free from tax. The cost of the shares is discounted.

Any disadvantages ?

Shares can be risky investments as the value of the shares could fall below the price paid.

Where can I find out more information?

Ask your employer if they have such a scheme.

Friendly Societies

Friendly Societies are allowed to issue ‘tax exempt life or endowment policies’. There is, however, a limit of £25 per month (or £270 yearly) on the premiums payable. However, within this modest amount, all the gains are free of any tax.

Why do I need one? 
Totally tax free investment.

Any disadvantages?
Limited amount allowed — see above.

How do I find out more information? 
Look for adverts in newspapers.

Further information

The FSA (Financial Services Authority) website, Money Made Clear has a section on savings.

Try the FSA’s Financial Health Check, and find out tips for a healthier financial lifestyle – now and in the future.

In-depth information on Savings and Investments can be found at the BBC website.

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