Individual Savings Accounts (ISAs) are not actual investments; they are tax-efficient wrappers surrounding your fund choice(s). When you make an ISA investment you pay no income or capital gains tax (CGT) on the returns you receive, no matter how much your investment grows or how much you withdraw over the years. An ISA is an ideal way to make the most of your tax-efficient savings limit and save for the future. The value of tax savings and eligibility to invest in an ISA will depend on individual circumstances and all tax rules may change in the future.

If you put all of your eggs in one basket, you are more vulnerable to risk

When deciding whether to invest, it is important that any investment vehicle matches your feelings and preferences in relation to investment risk and return. Hence your asset allocation needs to be commensurate with your attitude to risk. Another key question to ask yourself is: “How comfortable would I be facing a short term loss in order to have the opportunity to make long term gains?” If your answer is that you are not prepared to take any risk whatsoever, then investing in the stock market is not for you.

Choosing which of the world’s stock markets you want to invest in

Unit trusts are a collective investment scheme that enables you to invest money with others and participate in a wider range of investments and share the costs and benefits of doing so. They have proved popular over the years because cash is invested in a broad spread of shares, thus reducing the risk of losing money if the market falls.

Inheritance Tax planning matters

In order to protect family and loved ones, it is essential to have provisions in place after you’re gone. The easiest way to prevent unnecessary tax payments such as Inheritance Tax (IHT) is to organise your tax affairs by obtaining professional advice and having a valid Will in place to ensure that your legacy does not involve just leaving a large IHT bill for your loved ones.

The biggest change in pension legislation in a lifetime

The introduction of Pension Simplification legislation on 6 April 2006 (A-Day) brought about the biggest change in pension legislation in a lifetime with the following aims:

Bringing your pensions under one roof

Pension transfers can be complicated and you should always seek professional financial advice before going ahead. Remember, whether a transfer is suitable or not will very much depend upon your individual circumstances and objectives.

A new, simple, low-cost pension scheme

In December 2006, the former government published a White Paper outlining its workplace pension reforms, including proposals for NEST (the National Employment Savings Trust) – previously called Personal Accounts. This led to the Workplace Pension Reforms set out in the Pensions Act 2008. These reforms aim to increase individuals’ savings for retirement.

Options available when an occupational pension is not provided

Your employer is currently required to offer you the chance to join a pension scheme if they currently employ five or more employees. If an occupational pension is not provided, then this would normally be a Stakeholder Pension Scheme or alternative Personal Pension Scheme. The requirement for employers to provide access to Stakeholder Pension Schemes is regulated by the Pensions Regulator.

Contributing a preferential sum into an employee’s pension plan

Salary sacrifice (sometimes known as ‘salary waiver’) in the context of retirement planning is a contractual agreement to waive all or part of an employee’s salary in return for the employer contributing a preferential (equivalent) sum into their pension plan.

How the new rules could affect your retirement provision

From 2011, private sector Final Salary Pensions need only be uprated in line with the Consumer Prices Index (CPI) rather than the Retail Prices Index (RPI). Typically, CPI runs below RPI and, consequently, over time this could mean some final salary members experience a reduction in their retirement income.

Joining your employer’s scheme

Occupational pension schemes vary from company to company. Your scheme is likely to be one of two general types, Final Salary related or Defined Contribution Scheme.

Occupational pension schemes are pension arrangements that employers set up to provide retirement income for their employees. The employer sponsors the scheme and a board of trustees ensures that benefits are paid.

Planning for your retirement years

There are three types of non-State pension. Some are offered by employers and some you can start yourself. They are:

Comparable benefits in return for lower National Insurance Contributions

In 1988 it was possible for employees to contract out of the State Earnings-Related Pension Scheme (SERPS), now called the State Second Pension (S2P), where their work scheme did not do this for them already, and set up a form of Personal Pension Plan called ‘Protected Rights’.

Building up your entitlement to an extra pension

If you are in work, you may also be building up entitlement to the Additional State Pension. The Additional State Pension, or State Second Pension (S2P), is paid in addition to the Basic State Pension. Your entitlement to the Additional State Pension, whether from SERPS (State Earnings-Related Pension Scheme) or S2P, is calculated when you claim the Basic State Pension.

‘Qualifying years’ credited throughout your working life

The Basic State Pension is a government-administered pension. It is based on the number of qualifying years gained through National Insurance Contributions (NICs) you’ve paid, are treated as having paid or have been credited with throughout your working life.