What are Regular Savings?
Regular savings cover a wide range of savings products from the familiar high street deposit and savings accounts to the more investment oriented ISA’s (Individual Savings Accounts).
Usually regular savings are monthly or annual contributions or premiums from your source of income transferred into your savings account.
In the context of financial planning, regular savings are primarily investment vehicles which are savings for the future and depending upon your personal objectives, growth performance requirements, risk profile and affordability, some regular savings products will be more suitable than others.
For instance, high street deposit and savings accounts are suitable for individuals who require instant access to funds (capital) and/or have a zero risk profile. Accordingly funds in these types of accounts only offer low rates of interest and over the long term have little or no protection from inflation.
In contrast Stocks and Shares (equity) ISA’s are designed for the capital to remain invested for a longer term, and whilst historically equities have provided much higher returns than savings accounts, these types of investments have a higher risk element as the return of capital cannot be guaranteed.
What types of Regular Savings are available as Long Term Investments?
Long term investments are a form of saving for the future. Typically they will include:-
- Personal or Stakeholder Pensions: Regular contributions attract tax relief and built up funds in a selection of investments provide a pension income (taxable) with a 25% tax free cash amount from the fund on retirement.
- Individual Savings Accounts: Regular contributions do not attract tax relief and built up funds in a selection of investments can be provided on encashment at anytime without incurring either capital gains or income tax. Cash ISA’s can be encashed at anytime without incurring charges. Stocks & Shares ISA’s will incur charges on encashment.
- Regular Premium Savings: Regular contributions or premiums are usually invested in Life Insurance or Friendly Society savings plans. Contributions need to be made for a minimum period before providing a capital sum, which after charges can be less than the amount invested if not left until maturity. Provided encashment is made on maturity these funds are free from capital gains and income tax.
Why should I make contributions to Regular Savings?
The major reasons for recommending regular savings are the tax relief available on contributions (pensions investments only) or the tax exemptions available on encashment or maturity.
Nevertheless, there are certain contribution limits and fund charges applicable which are specific to each of the regular savings plans which must be considered, together with their historical and expected performance of the funds (return on investment) on maturity and the implications of early encashment, fund transfers or stopping contributions.
How do I make contributions to Regular Savings?
The first and most important step after you have decided you may want to make contributions to a regular savings plan is to have a discussion with us to provide you with independent financial advice.
Once we have agreed what the most suitable type of regular savings plan is for your particular circumstances we make an application on your behalf to make regular contributions into a selected fund based on how much you can afford your personal tax situation and the amount of fund required at maturity, at the acceptable level of risk you are prepared to take to match your needs.
Want to know more?
Talk to one of our qualified financial advisers on 01553 777600 or e-mail us at enquiries@ringassociates.co.uk
