Investment and Savings

Most people would agree that saving and investing is one of the best ways to build capital for the future. If you want to save a regular amount each month or have an existing lump sum to invest to achieve capital growth or income, there are many options open to you.

Like most things in life, saving and investment is a question of drawing a balance. On the one hand there are safe, secure and relatively low yielding investments such as Building Society accounts, and on the other are schemes such as Unit Trusts, ISAs and Personal Equity Plans, which offer the potential for far greater returns, but which also incorporate a greater degree of risk.

Helping you to strike a balance between the two is the job of your Independent Financial Advisor. Each individual will have their own needs and these must be taken into account when building a savings or investment scheme for the short, medium and long term.
This section is intended to be a general guide to savings and lump sum investments which can be specifically linked to an ethical / green fund. Please explore the sections below then contact us for more information.

Individual Savings Accounts (ISAs)

A detailed explanation of the ISA, as well as the current Cash ISA rates, is included in our main Ethical ISAs section.

Building Society Investment *

The first home for one's capital is a Building Society savings account. Such accounts offer the guarantees of an annual rate of interest and, depending upon the type of account, instant access to your capital. Interest rates can be improved by leaving the money in accounts with notice periods ranging from 30 days to two years.

For individuals, if you are a non-taxpayer, then interest can be paid gross. If however, you a Higher Rate taxpayer then after deduction of Basic Rate tax by the Building Society, there will be a further liability to tax. This will obviously reduce the returns available.

Whilst most high street Building Societies are much the same, there is an alternative to consider - the Ecology Building Society. Founded in 1981, this society provides a means of purchase of ecologically sound properties only. Indeed, it was the first society to strictly limit the type of property on which it is prepared to lend money. By investing in the Ecology Building Society you can support ecological projects and earn interest on your money. Ethical Investors works closely with the Ecology Building Society to promote socially responsible investment.

For most, it is essential to consider additional forms of investment, designed to build your capital over the medium to long term and to combat the effects of inflation.

Unit Trusts

A Unit Trust is a pool of money of a large number of individual investors. These funds are managed by an investment or insurance company, and invested across a broad selection of stocks and shares. The total 'pooled' investment is divided into units, and each investor buys a number of these units when they invest. The value of the units rise and fall as the value of stocks and shares change on a daily basis. By careful management, the insurance company will aim to achieve long term capital growth from the ethically screened stocks and shares they select.

The reason for choosing a unit trust is the security offered by the pooling of funds, and the greater buying power and risk spreading which can be achieved. As the minimum investment can be as low as £500, this pooling gives the smaller investor the broad investment spread usually only available to the much larger investor.

There are now over 60 ethical and environmental unit trusts available, and careful selection is required to find one(s) suitable to your personal ethical criteria. Our ongoing vetting and screening of these funds enables us to recommend the most appropriate fund(s) for your needs.

Personal Equity Plans

Announced by the government in 1986, Personal Equity Plans (PEPs) have provided powerful incentives for those investors wishing to build up their savings via medium/long term investment on the stock market. The factor which distinguishes PEPs from other stock market based investments is that all profit and income is free of tax. Therefore, you are able to build your capital over the years without any liability to tax.

The most common investment for money placed in PEPs is a unit trust, which allows your money to be invested in a wide selection of shares, thereby spreading the investment risk.

If you are new to Ethical Investors, or are considering becoming a client of Ethical Investors, you may hold PEPS that are not invested ethically. It is important to note that although no new money can be invested in PEPs after 5th April 1999, it will still be possible to transfer an existing Personal Equity Plan to another manager without affecting the underlying tax advantages. Ethical Investors is able to advise on Personal Equity Plan transfers, and in most cases can arrange for transfers to be undertaken at no cost to you. If you would like further information, please telephone or email us. Taking your ethical views into account, we will write to you with our recommendation for which PEP you should transfer to.

Investment Bonds

The investment principle is much the same as that for a unit trust. Your money is pooled with that of many other people, to increase the buying power, thereby reducing the risk.

There are two main advantages offered by an Investment Bond. The first is the ability to be able to defer liability to Higher Rate taxation, perhaps until a time when you are a basic rate tax payer. The second, is the availability to be able to draw regular income, up to 5% per annum of the amount invested, without any further liability to basic rate tax. Due to the favourable tax treatment of Investment Bond contracts, the facility to draw a regular income, without immediate liability to Higher Rate tax can be of benefit to a great many people. Investment Bonds do complement investment in other equity based schemes, and can help in the process of bringing balance to one's investments.

In addition, Investment Bonds do carry an element of life assurance cover (101% of the value of the plan), which can be a useful tool in Inheritance Tax planning.

Discretionary Fund Management

For those individuals with substantial sums to invest (usually in excess of £250,000), Ethical Investors offers a unique Discretionary Fund Management service. Under this arrangement, a personalised investment portfolio is established, in conjunction with a fund manager appointed by you, or by us. Ethical Investors works with clients to establish the ethical criteria to be applied to the investments, and will then liaise with Ethical Screening  to obtain a list of ethically acceptable companies. Investment will then be made by the fund manager using this approved list, to meet the financial objectives which have been agreed between the client and Ethical Investors. Full details of this service are available on request.

Regular Savings

If you have no immediate capital to invest, then it is an essential part of the financial planning process to investigate ways of building capital. Whatever your future needs - university fees for children, house purchase, holidays or retirement - saving on a regular basis is crucial to short, medium and long term financial security.
The range of schemes available included Building Society accounts, ISAs and Unit Trusts. As with lump sum investment, the key to any regular savings plan is balance. There must always be funds available to meet a sudden emergency, but there should also be a part of your savings which is working harder for the medium to long term.

Having built up funds in a building society account, other schemes should be considered. The advantage of using Unit Trust or ISA schemes for regular savings is that they offer flexibility. Payments can be increased, deceased or ceased at any time and without penalty. There is no fixed term, and so the money can be used for any number of purposes over the years.

Minimum contributions vary from company to company, but most are around £30 per month. It is also possible to add one-off lump sums at any time, perhaps from a Building Society account which you feel may have built up too high a sum, and the money could be working harder in a Unit Trust or ISA.


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