Monthly archive for February, 2015
With ISA season well and truly under way, this is an important time to consider how best to make use of this valuable tax break and remember, if you do not use your ISA allowance before midnight on 5th April 2015, it is lost forever. With the need to review existing ISAs as well as making sure new investments offer the opportunity for higher returns, we bring you our selection of the best income and growth Investment ISAs the market currently has to offer.
Below we have listed some of our most popular Investment ISA plans, featuring both income and growth investments. With income needs continuing to play a critical role for many investors, the attraction of having tax free income is understandable. Whilst for investors looking for growth, we have a number of plans including those which take a defensive view on the stock market, as well as investments with the opportunity to mature early or ‘kick out’. With the potential for headline returns of up to 13% annual income and 20% growth, we cover a wide range of opportunities.
Defined return, defined risk
All of the plans detailed offer you a defined return for a defined level of risk, which means that you know the exact terms of the plan prior to investing and exactly what needs to happen in order to provide you with the stated income or growth return. They also include what is known as conditional capital protection, whereby your original capital is returned at the end of the plan term, as long as the underlying investment has not fallen by more than a specified amount, normally 50% of its starting value. As savers continue to face the impact of record low savings rates, this feature could be an attractive option for those considering taking risk with some of their capital.
5.28% fixed income each year, monthly payments
The Enhanced Income Plan from Investec was our most popular income investment during last year’s ISA season and continues to remain a best seller with income investors as well as savers looking for investment alternatives. The main appeal of the plan is that it offers a fixed income of 5.28%, which is paid to you as 0.44% each month regardless of the performance of the FTSE 100 Index. Capital is at risk if the Index drops by more than 50% during the plan and fails to recover by the end of the term, in which case your initial capital will be reduced by 1% for each 1% fall – so you could lose some or all of your initial investment.
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7.2% fixed income each year, monthly payments
The FTSE 5 Monthly Income Plan also offers a fixed income with the current issue offering 7.2% each year, paid to you as 0.6% each month regardless of the performance of the stock market. The higher level of income is due to the return of your capital being dependent on the performance of five FTSE 100 shares – if the value of the lowest performing share at the end of the term is less than 50% of its value at the start of the plan, your initial capital will be reduced by 1% for each 1% fall, so you could lose some or all of your initial investment.
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With less than 7 weeks until the end of the tax year, now is the time to consider making good use of your ISA allowance and squirreling away your hard-earned cash from the tax man, if you haven’t done so already. ISA season is an important time for savers and investors to review their existing ISAs as well as make sure they maximise new opportunities, and with the increased £15,000 New ISA allowance, this time of year has never been more important. To help you make the most of your ISA allowance, we’ve put together out Top 10 tips for the 2015 ISA season.
Tip 1 – Don’t miss the end of tax year deadline
On the basis we can all be guilty of putting off until tomorrow those things which need to be done today, there’s a lot to be said for acting in good time. So before you do anything else ISA-related, make sure you remember the most important end of tax year deadline which is midnight on 5th April. This is the latest date for using your ISA allowance and since it cannot be backdated to a previous tax year – if you don’t use it, you lose it. Note that many ISA providers will need your application – and possibly your cleared funds – before this date and that some ISA plans have an earlier deadline for ISA transfers.
Tip 2 – Maximise your ISA allowance
As a result of new ISA rules which came into effect on 1st July 2014, your ISA allowance for the current 2014/15 tax year is £15,000. You can put the entire allowance into an Investment ISA (Stocks & Shares ISA), or the entire allowance into a Cash ISA. If you decide to use some of the allowance in one type of ISA, you can also put any remaining balance into the other type. Also remember that these allowances are per person, so a couple can invest up to £30,000 in total before midnight on 5th April 2015.
Tip 3 – Understand what your ISA could achieve
Why pay tax on money that you can protect from the tax man? If you had invested the maximum into an Investment ISA since the 1999/2000 tax year, and it had grown at 7% each year, you would now have a lump sum close to £240,000. This is a significant amount, especially when you consider over £100,000 of this would otherwise have been subject to income tax and/or capital gains tax.
Fixed income investments have risen in popularity year on year as more and more investors seek out new ways to generate a predictable and regular income from their capital. This popularity increases none more so than at this time of year, when the additional feature of receiving income tax free when holding your investment plan within an ISA is another reason to consider your options. So with ISA season upon us, and whilst savings rates continue to force many to consider taking on more risk with their capital, we take a look at what fixed income investments can offer and how to compare the latest plans available.
The here and now
Not only have fixed income investments been one of the real success stories in recent years having seen a significant surge of interest since the stock market crash of 2008/9, but this interest seems to be increasing as the needs and demands put on more of us from our capital fails to be met by traditional products, which often have variable and less predictable income.
Savings rates have also fallen dramatically over the same period with top five year fixed rate bonds currently paying around 3.0%, whilst fixed rate Cash ISAs are much lower at around 2.4%. So fixed term deposits are failing to deliver the returns so many cash savers had grown used to, causing many to consider having to take on more risk with some of their capital.
What is a fixed income investment plan?
The fixed income investment, or reverse convertible to give it its technical name, is a fixed term investment where the level of income received is fixed at the outset and is paid to you regardless of the performance of any specific shares or the stock market as a whole. The return of your initial investment is however determined by the stock market, which in usually based on the performance of a major stock market index such as the FTSE 100 (the Index) or a number of shares listed on the Index.
Because the income is not reliant on the performance of the stock market, investors have the benefit of knowing at the outset exactly how much income they will receive and when it will be paid. This certainty of income and timing is undoubtedly playing a key role in their popularity.
Fixed income, fixed term
Not only is the income fixed, but the term of the plan is also. The plan term is normally in the region of five to six years, thereby providing a defined period during which your capital is invested. This combination of a pre-determined fixed income paid over a fixed term creates an investment that is relatively straightforward to understand and which is more easily comparable to other income investments available in the market.
This contrasts with investing directly in shares or a UK equity income fund where in addition to your capital being exposed to daily stock market fluctuations, in both cases your income is variable and not necessarily predictable. Fixed income investments therefore offer a unique set of investment features when compared to more traditional income investments.
Here at Fair Investment Company there are a large number of our investors who decide to invest through us again and again and hopefully this has something to do with our customer service and the quality and relevance of our wide range of savings and investment products. This is also why in late 2012 we launched our experienced investor section. Here we take a closer look at what is driving more and more new and existing investors to this growing selection of investment ideas.
Existing investors – the inspiration
As a company, we have always looked at ways of providing innovative savings and investment ideas, which has often led to offering alternative opportunities alongside more traditional ways to save and invest. And as we approach our 15 year anniversary of helping a wide range of customers, we have never been more committed to finding ways to improve our site and make it easier for you to find and compare the latest investment offers, whilst also giving you plenty of ideas and product selections to help you identify whether they meet your needs.
Inspired by a rapidly growing number of existing investors who were seeking new investment ideas, our experienced investor section is now in its third year and continues to enhance our overall offering by featuring a range of innovative investment products. With the potential for very high growth returns and double digit income, this section is aimed at more experienced investors who are looking for a wider selection of top income and growth ideas and who are prepared to take a higher level of risk.
Fixed term investments
Many of our investors, both new and existing decide that an investment with a fixed term is the right way forward. This is why our most popular type of investment is the structured investment plan.
These plans offer a defined return for a defined level of risk, thereby offering an increased level of risk versus reward than better known investment fund. The return on offer is usually dependent on the performance of the stock market with the majority of plans available through Fair Investment being linked to an investment index such as the FTSE 100 Index, or a small number of listed shares, normally well known FTSE 100 shares.