Our Guides On Money
Putting a little money away regularly is the best way of saving up for expensive things, like a holiday, furniture, or a special family occasion.
There are two ways to save – short term and long term. Savings accounts are for times when you may need to get at your money quickly. They're different from investments, which are really for the longer term .
Pensions you get from your employer and pensions you start yourself differ. Make sure you understand what's available to you and how they work Pensions are long-term investments with special tax rules – for example, you get tax relief on contributions.
We have put together some information on each of the investment areas below, please do contact us if you need help with anything.
Tax concessions are not guaranteed and may change in the future
With so many different types of savings accounts now available, it is difficult to know which one to choose. The sort of account which is best for you is dependent upon several factors - for example, whether you need instant access to your money, how long you can tie your cash up for and whether or not you pay tax. Savings accounts most commonly fall into one of the five types of accounts detailed above
Instant Access or Easy Access Accounts
If you need access to your savings quickly then you should consider an easy or instant access account.
This type of account means that you can have access to your money instantly or within a few days depending upon the terms of the account used. Most Banks, Building Societies and Savings Institutions offer Easy or Instant Access accounts.
Notice accounts generally earn a better rate of interest but require you to give a certain amount of notice before withdrawing funds to avoid any penalty. The amount of notice that needs to be given depends on which account you choose.
These accounts are becoming less attractive as instant access accounts have become more competitive and allow you to withdraw your money immediately.
Bonds or Term Accounts
For many savers, the most important aspect of any investment is knowing that their money is safe and secure. If this applies to you, then bonds or term accounts could be what you are looking for. Bonds or term accounts are high interest savings accounts which offer the most competitive interest rates but which require your money to be tied up for a specific period of time. The interest rate on most accounts is fixed from opening the account until the maturity date.
The money in the account is tied up for a specific length of time, usually between 1 to 5 years and you are not usually allowed to add further funds to your initial deposit once a bond has been opened.
Most providers do not permit any type of withdrawal before the maturity date and if withdrawals are allowed then a penalty will normally be incurred.
Regular Savings Accounts
This type of account is aimed at people who can commit to making regular savings and deposit money into the account each month. A certain number of monthly payments have to be made into these accounts each year to prevent loss of interest or closure.
They often pay superior annual rates of interest by giving savers an annual bonus payable as interest on top of their interest rate. However, with some accounts, if you fail to make the required deposits you will lose the annual bonus.
Some accounts limit the amount you can put in each month and most accounts limit the number of withdrawals you can make each year, so they aren't much good if you need access to your money quickly.
Individual Savings Account [ISA]
The old ISA system used to limit how much you could put into each pot - you'd either get half your allowance in cash and half in shares, or you could choose to put it all in shares.
But from since last July, the rules were almost completely relaxed. Although you still have a limit to the amount you can save - £15,240 from 6 April 2015 - you now get to choose how you split this between stocks & shares and cash ISAs. You even get to choose whether you want to split it - if not, you can use the whole amount for stocks & shares or the whole amount for cash
You must save or invest by 5 April, the end of the tax year, for it to count for that year. Crucially, any unused allowance doesn't roll over - so if you don't use it, you lose it forever. You'll get a new allowance the next tax year, but won't be able to contribute anything to the old ISA.
Withdrawals may be made from the account, but once the maximum amount has been deposited in any year, no further deposits will be permitted that year, regardless of how much is withdrawn.
While cash ISA's do not always offer the highest interest rates in the savings account market, after tax you should fins they outperform ordinary non tax efficient savings accounts