Choosing an Investment account type based on your goals

Please note this blog post was published over 12 months ago and so may not include the most up-to-date information, for example where regulation around investing has changed.

Choosing an Investment account type based on your goals

Choosing an investment account type mainly comes down to your goals.

Types of investment include Stocks & Shares ISAs, Personal Pensions, and General Investment Account.

Long-term goals such as retirement are suited to Pensions, where you typically get tax relief on up to £40,000 per year (or 100% of your earnings if lower). You can withdraw from 55 years old.

Shorter term investments, perhaps for a home improvements, may be more suited to a Stocks & Shares ISA, where you can invest up to £20,000 this tax year in a tax-efficient account and withdraw anytime.

If you intend to invest more than £20,000 in a tax year but wish to withdraw before 55, then consider a General Investment Account, where you can invest as much as you like but are subject to Income and Capital Gains Tax rules on growth. You can withdraw anytime.

Something to keep in mind with any investment is to invest for at least five years. There will be times when markets dip, and by staying invested for longer you can ride out these fluctuations and benefit from the rises in the markets.

Once you know your goal, and which investment type is best suited to your goal, don’t waste any time in getting started! There’s a saying, “it is time in the markets, not timing markets.”

In other words, the earlier you start investing, and the longer you are invested, the more time your money has to grow. Even if you invest just £50 today, that’s still better than nothing. Indeed, if you invested £50 today, and then £50 a month in a Stocks & Shares ISA for a decade, with an assumed annual growth rate of 5%, that would be worth £7,490 after ten years.* Imagine the possibilities if you invested more, making regular contributions each month towards a goal. The key is to stay disciplined and slowly build towards your aspiration.

*The actual annual growth rate will depend on your investments and how they perform.

The calculation takes into account our average annual fee of 1.16%. It doesn’t take into account the impact of inflation, which will reduce returns, and assumes you only make the contributions set out.

With investing, your capital is at risk. Investments can fluctuate in value and you may get back less than you invest. Past performance is not a guide to future performance. Tax rules can change at any time. This blog is not personal financial advice.