5 Great Ways to Save for a Rainy Day - By: Gareth Hoyle1

A piggy bank may be a “cute” way to save money, but it won’t give you anything back that you don’t put in. A bank account too can be volatile; interest rates can vary between banks, meaning that your bank balance might not give you much extra back after a year of saving. For that reason, we’ve explored five potentially great ways to save for a rainy day...

Get creative with your cash

Instead of piling coins and cash into a piggy bank, why not get a little bit more creative? Tax free national saving investments might be a route you want to explore; each person can invest up to £30,000 in premium bonds. Other options include savings certificates (you can invest up to £15,000 annually) and £3,000 in each issue of Children’s Bonus Bonds.

An ISA might be nicer

Each tax year you can invest up to £10,200 (or £20,400 for couples) into an Individual Savings Account (ISA); the great part is that income and capital gains are tax free. A financial adviser should be able to help you decide which of your assets to hold in an ISA depending on the rate of tax you currently pay.

Axe the capital gains tax

If you aren’t already aware, you can make investment gains of £10,100 each year without having to pay capital gains tax (CGT). Keep in mind the profits you make from other assets such as second homes as this will help you to plan how to make the most of the annual allowances.

Pennies for your pension

Money that you invest into a pension receives tax relief; a welcome addition for your pocket in the future. If you are a “non” or “basic rate” tax payer, you only have to pay 80 pence for each £1 invested in your pension. Again, a financial adviser should be able to make you more aware of what your level of tax relief would be for your own pension fund.

Solutions for higher earners

By utilising onshore or offshore investment bonds, higher and additional rate tax payers can enable tax to be deferred until a time when they are likely to be basic rate tax payers. Another choice is to consider a Maximum Investment Plan which builds up a fund only subject to the basic tax rate. This would be free from higher and additional rate income tax and CGT as long as regular investments are maintained each year for at least 10 years.

About the Author

Skandia have a range of private pensions available for you. Secure your future with Skandia.

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