From perfect pensions to insightful investments – make your money work better for you here.
”Buy Low, Sell High”, red braces and huge mobile phones. These are probably the first things that spring to mind when someone mentions investing to you. However, these days some things have changed a bit.
Different types of investments aim to make money in different ways. Some investments aim to provide capital growth – which means the original amount you invest grows in value. Some aim to provide income. And some aim to provide a bit of both.
Getting financial advice
When you’re shopping around for a financial product, it’s important to know who’s offering what and what will suit your needs best. There are two ways of finding this out. You can:
1. gather information yourself (banks, building societies, adverts or online); or
2. get financial advice from an adviser.
When you gather information it is the same information that anyone can access, so your personal circumstances are not looked at. Financial advice is when a professional adviser assesses your personal circumstances and recommends financial products that are suitable for you. For example, the money that young people, students and graduates have to invest is likely to be different than for someone older, with greater financial security. The adviser will then give you a recommendation in writing. There are three different types of advice:
Independent advice – where advisers make recommendations on products after researching the whole market and offer you the opportunity to pay by fee for their advice.
Multi-tied advice – where advisers are able to recommend the products of a limited selection of providers.
Tied advice – where advisers can only advise on the products of one provider.
Check out this guide to getting financial advice – Getting help with money decisions.
Investing carries risks. You need to understand what these are and how they are associated with different types of investments. Remember – investments are usually long-term plans, and the values may go up and down in the short term. If you’re not sure about this kind of risk, have a look at ‘saving – the next steps’
Protect yourself from scams
Be wary of investment scams. If someone contacts you with information about a financial investment scheme that sounds too good to be true, it probably is. Always check that the person you’re dealing with is authorised by the FSA – see Check the Register
Retirement probably seems a long way off right now, and is the last thing on your mind. But if you want a decent income when you get there, it’s never too early to plan for it. For 2010/11, the full basic State Pension will be £97.65 a week for a single person. Talk to any pensioners living on this amount alone, and they’ll tell you it doesn’t go very far. Pensions may not seem relevant for young people, students and graduates, but the sooner you start, the longer you’ll have to build your retirement fund.
Pensions have names like ‘stakeholder pensions’ & ‘personal pensions’, but they are all a type of investment. You save money into them so that you will have money to live on once you retire. The big advantage of a pension over some other types of investment is that they have special tax rules. This means that you are not taxed on the money that you pay in, and as the money grows it is largely free from tax.
There are two main types of pension, Workplace & Personal.
Most employers nowadays offer a pension scheme. Your employer will usually contribute to your scheme, and generally sort it out for you. Although very rare these days, ‘final salary schemes’ or ‘defined benefit’ pensions may be available. This type of pension is where your income in retirement is directly related to your salary. The more popular are ‘money purchase schemes’. This means you save money into a pension pot. This is invested by the people who run the pension scheme on your behalf. You will get a sum of money on retirement. And you’ll get statements along the way, letting you know how your pension is doing
If your job doesn’t offer its own pension scheme or you are self-employed, you can still have a personal pension but only you will contribute to it. Personal Pensions are money purchase schemes (see above) and are run by a range of different financial service companies. If you are considering getting a personal pension, you will need to shop around to get the best deal for you. You will probably want to get advice from a financial adviser about saving for your retirement. Check that you are using an FSA-authorised advisor
For more information about managing your money, check out whataboutmoney.info