The range of National Savings products are offered to the public simply as a means for the government to raise money. As they are backed by the government these savings products are considered to be the least risky of available investment options.

As a consequence, investment returns are fairly modest and some products will tie up the investment for quite some time, but a positive is many products do attract some very appealing tax benefits.

You can invest in an ISA either by making regular payments or with a lump sum. However, there are strict annual contribution limits and other criteria that must be adhered to or you will risk losing the many ISA tax benefits.

ISAs allow individuals to hold cash, shares, and unit trusts free of tax on dividends, interest, and capital gains tax.

ISAs are available to all UK resident individuals over the age of 16 for cash ISAs and over the age of 18 for stocks and shares ISAs. The minimum level of contribution is fairly modest and there is no fixed period of investment.

They were designed to encourage an increase in saving by being appealing to investors seeking a tax-efficient investment vehicle with the potential for higher returns than that available from the banks and building societies.

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

• are under 18
• reside in the UK
• are not entitled to a Child Trust Fund account

NOTE: A child cannot have a Junior ISA as well as a Child Trust Fund account. However, the proceeds from a Child Trust Fund can be transferred into a Junior ISA.

A unit trust fund allows a group of investors to combine their cash and invest as a group resource. In essence, it is a large fund of capital, controlled by trustees, with the aim of achieving either long term capital appreciation or income returns or even a combination of both.

Unit Trusts consist of units with each having both a buying and selling price. The number of units held by an investor multiplied by the unit price will give the total value of the investment.

The minimum level of contribution is fairly modest and there is no fixed period of investment.

OEICS operate in a similar way to a unit trust except they are a limited company and not a trust. An OEIC has a depository which holds the securities and performs a similar function to that of a trustee.

It is structured to invest in other companies with the option to regularly adjust both its investment strategy and fund size. Investors normally purchase shares in the fund directly from the fund itself rather than from the existing shareholders.

Most OEICs only have a single unit price whilst unit trusts always have two prices, the lower or bid price is what you get when you sell units and the higher or offer price is what you pay when you buy units.

The minimum level of contribution is fairly modest and there is no fixed period of investment.

An Investment Trust is a limited company whose business is the investment of shareholders’ funds, the shares being traded like those of any other public company. They are a fixed portfolio of bonds, stocks or other securities. There are a fixed number of shares and unlike open ended funds new shares are not created by managers to meet increased demand. The shares in an Investment Trust are traded on the open market at a price determined by the market.

The minimum level of contribution is fairly modest and there is no fixed period of investment.

Are lump sum investment products which aim to provide capital growth or income over a 5 year plus timescale. They should certainly be held for a minimum of five years to avoid the likelihood of early surrender penalties. There are no age restrictions and minimum contributions are normally £10,000 although with no upper limit.

Capital Investment Bonds are available through Insurance companies and include a life assurance element without the requirement to produce evidence of good health. They can be set up either onshore, within the UK, or offshore, where the Bond would benefit from certain tax benefits. The relative benefits will depend on the clients personal tax situation.

It is important to seek professional advice before making any decision.

A Venture Capital Trust (VCT) is a tax efficient UK closed-end collective investment scheme with the purpose of providing private equity capital for smaller high growth companies. The shares of these companies are not listed on a recognised stock exchange and are considered higher risk than ordinary equity investments, although investors will have the risk spread over a number of different companies.

For the right investor VCTs are attractive as they may be entitled to a variety of income tax and capital gains tax reliefs. Additionally, VCTs will be exempt from any corporation tax liability on gains resulting from the disposal of assets.

NOTE: VCTs are high risk, long term investments and would only likely to be suitable for knowledgeable, wealthy investors.

The Enterprise Investment Scheme uses a variety of tax breaks to encourage individuals to invest in smaller unquoted companies requiring either start up or growth finance. Like VCTs these are higher risk investments appealing more to the sophisticated wealthy investor.

There are two schemes investors can consider to obtain tax relief for investing in small unquoted companies:

• Enterprise Investment Scheme (EIS)
• Enterprise Investment Scheme (EIS)

Tax reliefs vary between the two schemes and professional advice should be sought prior to making any decision.

An offshore investment is the keeping of money in a jurisdiction other than one’s own country of residence. Investing offshore is an accepted way of reducing the taxes levied on the investments of individuals.

Potentially offshore funds offer greater investment returns and usually greater risks than onshore funds. Many people are attracted to the seeming tax benefits without considering fully the relative advantages and disadvantages of both onshore and offshore investments. Personal circumstances should be taken into account before deciding which is best for you.