These are tax efficient products suitable for both regular savings and / or lump sum investment. From 1st July 2014 the new maximum ISA allowance is £15,000 per individual. It is important to remember that ISAs are tax efficient wrappers and not products in themselves. The actual products beneath the wrappers are called Unit Trusts and OEICs.


OEIC is short for Open Ended Investment Company; both OEICs and Unit Trusts allow investors to pool their money. Unit Trusts were the forerunners to OEICs which were introduced in the late 1990’s with a few small technical changes designed to help the sales of these funds in Europe. The key advantage for the private investor is that investment risk is reduced compared to buying shares directly because the fund will be investing in a broad spread of companies giving greater diversification.


An Exchange Traded Fund (ETF) is a low cost combination of OEICs / Unit Trusts and individual shares. Generally speaking an ETF represents a portfolio of securities (shares, bonds or alternative assets), which aims to track the performance of a specific market index like the FTSE 100. Buying a single ETF gives you exposure to a specific market. Alternatively, you can buy a range of ETFs over several markets in order to implement a more sophisticated investment strategy.


Investment Trusts are also pooled investments managed by a fund manager – they are however companies that are traded on the London Stock Exchange. Investment Trusts have the ability to borrow money in order to improve their investment returns – this process is known as gearing. It is generally considered that this capacity to borrow money puts Investment Trusts into a higher risk category than OEICs & Unit Trusts because the fund manager can take bigger risks to achieve their objectives.


This form of investment only accepts lump sums as opposed to regular savings. The tax treatment of the bond will depend on a number of variables including your tax status at the time of encashment and whether an onshore or offshore bond is most appropriate for the individual being advised.

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