investment and tax

slopemaster

I have a couple of questions about unit trusts and guaranteed equity bonds.

First a bit of background. I am early 50s.
Will have money from sale of house to invest - some of it short term, some longer - up to 10 years. Presently not a taxpayer, but if I put it all in an account at7%, it would take me over the tax threshold.
So my plan is, put some in 1-yr term a/c (ICICI), some in National Savings index-linked, max amount in ISA, a bit in pension .... then put enough in unit trusts or bonds or whatever so as to avoid becoming liable to income tax.

I don't know much about this stuff but am gradually researching it. The "financial adviser" (ie salesperson) I saw of course tried to persuade me to put it all in different products with her financial institution, and also tried to convince me that the stock market is about to recover, which seems unlikely!
But she did mention a couple of things which interested me.

One was a Halifax GEB which guaranteed the capital if market fell consistently (over 5 or 6 years I think), or gave you 70% of highest-ever figure if it rose, or rose and then fell. This sounded pretty good to me as I am fairly risk-averse. What do others think; is it actually crap?

The other was that if you bought their unit trusts (but not the guaranteed one), then you could draw out up to 5% per year and it was not taxable as it is not interest, but a bit of the capital you are drawing. And if you didn't take this 5%, you could carry it over to future years. Can one of you knowledgable people please tell me whether this is a fairly general thing, or specific to their products? Could I buy a unit trust from a cut-price broker and get this sort of flexibility???

Grateful for any info, thanks.

dunstonh

The "financial adviser" (ie salesperson) I saw of course tried to persuade me to put it all in different products with her financial institution

Dont see a sales rep. See a proper financial adviser. Hopefully the FSA will stick with their plans to remove the "adviser" tag from sales reps next year. We need to clear the waters which have been muddied by the sales reps and real advisers all using the same titles.

and also tried to convince me that the stock market is about to recover, which seems unlikely!

No investment should be 100% stockmarket unless you are a high risk investor. However, whilst there will be volatility, the market has actually priced in a lot of the trouble before the trouble has occured. The stockmarket is not all one risk level either. There are always options which offer good potential whilst others are not doing well.

One was a Halifax GEB which guaranteed the capital if market fell consistently (over 5 or 6 years I think), or gave you 70% of highest-ever figure if it rose, or rose and then fell. This sounded pretty good to me as I am fairly risk-averse. What do others think; is it actually crap?

Yes. Its pretty poor. There were plenty of better examples if you wanted a guarantee.

The other was that if you bought their unit trusts (but not the guaranteed one), then you could draw out up to 5% per year and it was not taxable as it is not interest, but a bit of the capital you are drawing. And if you didn't take this 5%, you could carry it over to future years. Can one of you knowledgable people please tell me whether this is a fairly general thing, or specific to their products? Could I buy a unit trust from a cut-price broker and get this sort of flexibility???

If that is unit trust then the 5% withdrawal would involve the encashment of units which would not be liable for income tax. However, you would be liable potentially for CGT.

That said, I think you are mixing up unit trusts and investment bonds. What you describe sounds more like an investment bond. Investment bonds are better for fixed interest and higher yielding funds but not so good with equity funds where unit trusts would be better.

You wouldnt want to buy any unit linked product from a bank. Especially Halifax who seem to manage to have some of the worst investment funds available.

slopemaster

dunstonh wrote: »

Yes. Its pretty poor. There were plenty of better examples if you wanted a guarantee.

Where could I start looking?

dunstonh wrote: »

I think you are mixing up unit trusts and investment bonds.

Yes, i probably am. (The brochure just calls them funds)
Could you possibly point me at something that explains the difference?