Collective Investments

With a collective investment, your money is pooled, along with that of other investors, to create a large capital sum. Professional fund managers then use this capital sum to build up a large portfolio of investments. This approach enables you to indirectly hold a wide range of stocks and shares or other investments in a way which would not be practical for the majority of individual investors, whilst reducing the effects on your capital of fluctuations in individual share values.

Collectives can also invest in fixed-interest instruments. These include UK government stock, also known as gilt-edged stock or "gilts" for short. Corporate bonds are also fixed interest instruments and both represent direct borrowing on the part of the issuer of the bonds. They are referred to as "fixed interest" because their cost of borrowing is fixed, while the price of the bonds themselves may float up or down depending on supply and demand.

Investing in Equities

Investing in equities means buying stocks and shares in companies listed on the stock exchange. Historically this brings greater rewards than investing in bank accounts and bonds as you have the possibility of gaining not only a dividend - a proportion of the company's after-tax profits distributed to shareholders - but also a capital appreciation. If the price of the shares goes up after you buy them then – on paper - you have made a capital gain.

But with these increased rewards comes greater risk as the value of shares can go down as well as up, which means you risk losing your investment if the value of your shares falls.

Individual Savings Account (ISA)

ISAs represent a tax-efficient container in which to place cash savings and investments in equities, bonds and collectives.

An ISA is available to all UK resident individuals and to Crown servants (for example, those in the UK’s armed forces, diplomatic service or overseas civil service) and their spouses or civil partners who are not resident in the UK.

To open an ISA:

• You must be over the age of 18 for cash ISAs, stocks and shares ISAs.
• You cannot hold an ISA with or on behalf of someone else.

Frozen ISA Allowances for the 2025/2026 tax year

Endowment Policies

These are life insurance policies that are designed to pay a lump sum after a specific term and pay out a guaranteed sum if the person insured dies within the term of the plan.

Although it is still possible to buy endowments that guarantee the value of the lump sum at maturity, the majority of policies do not guarantee the maturity value - the money that you get back will depend on the value of the investments within the policy.

By using life insurance policies, the value of the plan at maturity can be paid without paying any further tax if certain ‘qualifying conditions’ are met. Although the policyholder can avoid paying any tax at maturity, the insurance company does pay tax on income and gains within the policy.

These policies can be particularly useful if you have an investment objective you’d like to realise regardless of what happens to you. For example, to repay a mortgage, provide a legacy for your children or provide for university fees etc.

The least risky of investment options are those offered by National Savings, which raises money on behalf of the UK Government.

While investment returns are not exceptional and some involve tying your money up for long periods, they are nevertheless stable and in some cases can be paid tax free.

They include National Savings Bank accounts and various forms of savings and Income Bonds. These savings and investment products are backed by H.M. Treasury, which makes them the most secure cash products available in the UK.

Individual Savings Accounts for children or Junior ISAs were introduced in November 2011 replacing Child Trust Funds. They are long-term, tax-efficient savings accounts for children who

• are under 18
• live in the UK
• have not invested in a Child Trust Fund account.

If your child lives outside the UK, they can only open a Junior ISA if you are a Crown servant (for example, you work in the UK’s armed forces, diplomatic service or overseas civil service) and the child depends on you for care.

A child cannot have a Junior ISA as well as a Child Trust Fund account. A Junior ISA can be opened and the trust fund transferred into it.

There are two types of Junior ISA, namely a cash Junior ISA and a stocks and shares Junior ISA. A child can have one or both types at any one time but the total annual amount which can be paid into either or both combined is £9,000 (tax year 2024/25).

Investing In Offshore Collective Funds

Offshore investment vehicles include unit trusts, mutual funds or investment companies. The offshore company will normally be situated in a country where the investment fund pays little or no tax on its income or gains. While this does allow the investor some benefit while invested, if the proceeds are brought back to the UK they will be taxed at that point.

Risk & Reward

As with any other investment, the risks and rewards will be dictated by the investment strategy and decisions of the investment managers. However, it should be borne in mind that many offshore investments do not benefit from the legislative and regulatory protections that UK-authorised investments have.

Capital Investment bonds are life insurance contracts used for the purposes of investment. They are designed to give capital growth and/or income over the medium to long term with access to your money by taking regular or one-off withdrawals. Most bonds are designed for investment over at least five years. If you cash in your investment before that time, you are likely to be charged an early surrender penalty.

Bonds are set up through insurance companies without the need for a check on your health status and normally people of any age can hold a bond. Bonds can be opened onshore (within the UK) or offshore (usually in the Isle of Man or the Channel Islands) to take advantage of tax concessions. The decision will depend on your personal tax situation.

Most bonds have no upper limit on how much you can invest, but barriers to entry can start higher than other investments, with a £10,000 minimum contribution being typical.

Why Save?

Often, people save for a specific reason and it's usually the safest way to build up a pot of money.

It’s less risky than investing, but it offers limited growth. The most you'll earn on the money you save is the interest added. Saving is perfect for people who don’t want to take any risks with their money, and most savings accounts have easy access or are for a fixed term.

There are many different ways to save, but whichever way you choose, the general idea is the same: to build up some money - savings - that can be used, for example, to make a large purchase such as a new fridge, go on holiday, pay for school fees or cover the cost of expensive times like Christmas.

Savings also provide security by making sure that some money is put aside for emergencies or unexpected costs.

Where Can I Put My Money?

There are several different types of savings products out there. The links in this section will provide a guide to what is available to you.

Critical illness insurance pays out when one of the specified critical illnesses occurs. For example, following a heart attack, stroke, cancer or some other specifically defined critical illness.

Cover is for a set term, which may be equal to a mortgage term, or for when children have grown up, until retirement, or until another life stage milestone is achieved. It may be worth considering having one policy for a set term to cover the mortgage and another that will provide money to help provide for your different lifestyle if a serious illness happens.

Most people choose a lump sum to be paid out. There is the option of receiving the payout as a set income over the term remaining, which is often a lower-cost option.