Why the best place to invest may depend on you


At Continuum, we believe that investment is not simply a matter of looking for a bargain when you find you have some spare cash. To make the most of your investments, you need to avoid giving a larger share than you need to the taxman. It requires expert knowledge to make your investment tax-efficient, and careful planning.

What’s more, that planning needs to be on an individual basis.

The fact is, there is no single ‘best’ investment. The choice will change over time. As we get older and our priorities and financial goals change.

We look at some of the answers for tax-efficient investment for different age groups

Children under 10

Of course, few children still in primary school have incomes to invest. But many have generous parents and increasingly grandparents who want to help them get off to a sound financial start.

The simplest way to do this can be a Junior ISA. Family and friends can gift up to £4,368 for the tax year 2019/20 rising to £9000 for tax year 2020/21 or a child’s ISA.  Like other ISAs, the proceeds will be free from dividend, income and capital gains tax, and when the child reaches 18, it becomes their money to either spend or continue to invest tax-efficiently, by transferring the funds into another ISA product.

But for a longer-term solution, you could consider a pension for a child.  While you may be more concerned about your own retirement the returns on long term pension savings are hard to ignore.  According to HMRC figures, around 60,000 under-18s have a pension plan. The power of compound interest and skilled investment management could mean that in around 50 years’ time, they could have a comfortable retirement, whether or not they can afford to make pension contributions of their own. You can pay up to £2,880 a year into a junior pension which will be topped up to £3,600 by the government in tax relief.

Under current tax legislations, the pension pot will be free from capital gains tax – but the pension itself will be subject to income tax when it is withdrawn.

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Whatever your age, investments need to be geared to your financial circumstances. To start getting a clearer idea of the possibilities for you and your money look at our free online service here.

Teenagers and young people

From the age of around 11 to mid-twenties, the need to prepare for further education and to get on the property ladder start to get closer. The youngest teens could continue with their Junior ISA or pension, while after the age of 18 an adult ISA allows up to £20,000 to be invested tax -free each tax year. But there is also the Lifetime ISA, which allows adults under the age of 40 to invest up to £4,000 a year (up to the age of 50) and get a 25% government bonus on top of interest and investment earnings.

This money can only be used to buy a first home, or for retirement. However it may be possible to withdraw funds from the Lifetime ISA, if you are aged 60 or over or terminally ill, with less than 12 months to live.

A 25% charge is payable if you withdraw cash or assets for any other reason.

The Lifetime ISA limit of £4,000 counts towards your annual ISA limit.

Younger adults

From our mid-twenties to early forties, most of us will be focussed on buying a home, and on a young family. Cash may be tight, but monthly savings of small amounts may still be possible. You can set up an ISA to take a regular amount from your bank account each month.

You should have your workplace pension building for the future, but you should consider a private pension too.

Older adults

Your forties and fifties are likely to be the time when your salary is highest, and financial demands are starting to lessen as the mortgage is paid off and the children leave home.

It makes sense to invest as much as possible into your ISAs and your pension, especially if you are a higher rate taxpayer.

The extra tax relief on your contributions makes your pension the most rewarding and tax efficient investment you are ever likely to have.

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At Continuum we constantly monitor the investment market – a call to us us could help you find the best way to keep your investment free from the taxman.

Ready for retirement

With retirement coming close, making the most of your pension is vital – but remember the annual contribution limit of £40,000 or your total income, whichever is the lower.  This means that making full use of your ISA entitlement is still vital as you approach retirement age.

What about after your retirement?  It is still possible to make pension contributions, but there are some tight limits imposed once you have begun to access your pension pot. You may prefer to use your ISA entitlement, which will continue unaffected.

Preserving the capital that you have worked so hard to accumulate becomes the priority. Moving away from equities and their volatility and into bonds or cash investment may become the best way to avoid risk, while keeping the taxman at bay.

Getting help

Tax efficient investment can make a huge difference to your wealth but getting the right investment for the particular stage of life you are at is a challenge. That is why it is vital to get expert support, and an investment strategy aligned with your age, and objectives.  At Continuum we can help, with a personalised investment planning service, whatever stage of life you have reached. Call us now to make a start on making the most of your investment, by making them tax efficient.

The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.

The value of investments can fall as well as rise and you may get back less than you invested.

The Financial Conduct Authority does not regulate taxation advice

By incurring a Lifetime ISA Government withdrawal charge you may get back less than you paid in.

By saving in a Lifetime ISA instead of a qualifying pension scheme you could lose contributions by your employer, if any.

Saving in a Lifetime ISA may affect your entitlement to current and future means tested benefits.

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