Savings and investments

There are so many different types of savings and financial investments that it is wise to seek advice.

National Savings products

Some of the least risky of investment options are those offered by National Savings, which raises money on behalf of the UK Government.

While investment returns are not necessarily spectacular and some involve tying your money up for long periods of time, they are nevertheless stable and in some cases tax-free.

They include National Savings Bank accounts and Savings Certificates and various forms of Savings and Income Bonds.

Individual Savings Accounts (ISAs)

ISAs represent a tax-efficient container into which to place cash savings and investments in equities, bonds and collectives.

If you are under 50 you can currently invest up to £7,200 in an ISA over the course of the 2009/2010 tax year. However, for people who are aged 50 or over on or before 5 April 2010, a new limit of £10,200 (of which up to £5,100 can be cash) will apply during the current tax year. This new limit comes into effect on 6 October 2009. Other investors (i.e. people under 50 years old) can benefit from the revised limit in the next tax year from 6 April 2010.

Equities

Both cash ISAs and National Savings products are certainly much less risky than buying equities, that is to say investing in the shares of companies listed on a stock exchange. However, equities do offer an upside possibility that National Savings products do not.

You have the possibility of gaining not only a dividend - a proportion of the company's after tax profits distributed to shareholders - but also a capital appreciation. If the price of the shares goes up after you buy them then you have made, on paper at least, a capital gain.

The bad news though is that the value of shares can go down as well as up, which means you risk losing your investment if the price of the shares falls.