Savings and Investments

There may well be a subtle distinction between the two which if made, can help conceptualise the financial planning process. I'll try-

If we regard savings as money which is being put aside, sometimes on a regular basis and sometimes from time to time, and we look on investments as what we do with the savings money, some hopefully useful points can be made.
When saving money from income, probably the first call on the money is to establish a deposit account where the accumulating money is not at risk, and save up some money in that. Here in the UK one of the options for savings of up to £425 a month (£850 per couple) could be into a cash ISA. Cash ISA's are usually just deposit accounts in which the interest earned is not taxed.

Next, if you are some way from retirement,it is beneficial to save by putting money away in your pension fund. If you do not already have enough cash to fall back on, remember Not to put too much in your pension because you won't be able to get any pension money back out until you are 55. It is important however to bear in mind that for every 80p you put in your pension fund the Inland Revenue add another 20p, and if you are a higher rate tax payer you can claim another 20p relief as well. This is up to your highest marginal rate. Please be aware that a pension is a longer term contract that cannot be cashed in until 50 (55 from 2010).

After that, if you are able to save more money regularly then consider a Stocks and Shares ISA into which you can put another £425 a month (£850 for a couple with a £425 allowance per person). Clients who have saved every year in ISA's will potentially have a nice size pot when they reach retirement and because they can withdraw from it tax-free, we find it very useful indeed as a tool in the box when managing the tax take down on their retirement income.

As far as Investing these Savings is concerned, saving regularly into Stocks and Shares and into Property and Bond funds over many years either in your Pension Plan or your Stocks and Shares ISA, could reduce the investment risk which you are taking when compared to making a lump sum investment. This discipline of continuing to put money in each month even through times when the value of the assets accumulated is falling, allows you to buy some assets at low prices and hold them until they come good. But keep a close eye as you approach retirement on the risks you are taking. We will of course help you with this. Using the Nucleus Platform for your Pension plan and your Stocks and shares ISA allows us to facilitate switches amongst funds for you usually at no cost, so that you are able to efficiently use a lower risk investment strategy at say 65, than we would expect you to apply when you were 35.

The Financial Services Authority does not regulate deposit accounts

Please remember that past performance of funds is not a reliable indicator for future performance. Level and bases of, and reliefs from taxation are those currently applying but are subject to change and their value depends on the individual circumstances of the investor.