Savings

"Is it worth using my savings to repay my home loan?"

It’s a tempting thought, when your savings are lying around doing very little on pitiful rates, but mortgage costs don’t seem to have tumbled nearly as much. Here are My IFM’s four ways to make sure you’re overpaying the right way.

A pooled (or collective) investment is where a group of people put their money into a fund which is then invested in one or more asset classes by a fund manager. There are a number of benefits to pooled investments including:

There are a number of different types of savings account available including:

These are investments which include an element of life cover. Essentially you pay a lump sum to a life assurance company which is then invested for you until you cash it in or until you die. They do not run for a specific term but should still be thought of as a medium to long term investment as they often require you to tie up your money for at least five years and there will usually be a charge if you cash in the bond during the that period.

Investment funds, sometimes called collective investment schemes, are pooled investments run by fund management companies. Their objective is to grow your money pot in the medium to long, generate an income, or some combination of the two. You purchase ‘units’ or shares in the fund, which are then invested on your behalf according to the fund’s rules and whichever investment objectives are being pursued.

Endowments combine investment with life cover. They generally have a fixed term and usually require you to pay a regular fixed premium, some of which is used to buy life cover while the remainder is invested. At the end of the term you should receive the proceeds of the investment, and if the policy ran for at least ten years its value will be paid to you as a lump sum, generally without any further tax liability. If you die before the end of the term the policy pays out a death benefit whose amount will depend upon the premium you pay, your age and sex, and the length of the policy.

If you have decided to send your children to a fee paying school, or think you will want to help them with the cost of university education, then it is worth thinking carefully about how to best fund such fees. Eighty percent of parents pay their children’s school fees directly from income, despite the fact that there may be more efficient options available.

Individual Savings Accounts (ISAs) were introduced in 1999 as a way to let you save a certain amount each year without having to pay tax on the interest you earn. They replaced Personal Equity Plans (PEPs) and Tax-Exempt Special Savings Accounts (TESSAs). You can invest in two separate ISAs in any one tax year: