Savings Plans Advice & Guidance Service
Lawsons Equity Limited is a European-based financial services company providing authorised and regulated advice to clients and their families who may be looking for bespoke savings plans solutions. If you are currently living in UK, Malta, Spain, Portugal, Italy or thinking about relocating to any of these countries and need Savings Plan advice or guidance, please book a free consultation call today. We are also one of the leading European experts on QROPS (Qualified Recognised Overseas Pension Schemes).
What is the Difference Between Savings Plans and Investing Money?
It is important to understand the similarities and differences between savings plans and investing your money. It is also important to be sure that you are doing both within your budget and wealth building plan.
Basically, saving money is putting money aside on a regular basis. You spend less money than you earn and put the rest into the bank. You should have this be an automatic part of your monthly budget.
Investing is taking this a step further. Once you have a good amount saved, you can begin investing money. Investing is the way to grow your money and begin to build wealth.
If you keep your savings in a savings account, the amount of interest you will earn will be very small and the value will deteriorate due to inflation.
When investing you will be owning an identifiable asset. Investments carries a higher risk than savings or deposits as the value of an investment is not guaranteed and the whole value of your investment might be lost.
However in good times, the overall value earned might be higher than the interest granted by the bank.
Savings Plans Explained In Full
This section of our guide looks at the various forms of savings. In the first instance, you should have money in your emergency fund that is not invested.
It needs to be easily available without taking a big penalty for accessing it. A simple savings account or deposit account at your bank is a safe place to put this.
If you do not have an emergency fund, then you should consider dealing with this first. The savings market is flooded with many different types of account, which can make it difficult to decide which deal is best for you. These can be provided by your bank, building society, life assurance Company etc.
Several factors will affect which kind of savings account suits you, including whether or not you are a taxpayer, how likely you are to need access to your money and for how long you are prepared to lock it away.
There are also many reasons why you would consider savings:
- Specific purchases such as a new car
- School fees
- Wedding provision
- Extra provision for retirement
- Or just a simple feeling of security, ‘rainy day’ provision
Some different types of savings plans are listed below:
1. Instant access savings accounts
Instant access savings accounts do what they say on the tin: they allow you to withdraw your money quickly and easily. Some instant access accounts come with a plastic card that can be used to take out money from cash machines, some offer over-the-counter withdrawals and many allow you to transfer money out of your account online, penalty-free. Saving in an instant access account makes sense if you think you might need to withdraw some of the cash you’ve put aside.
‘Emergency savings’ should be kept in an easy access account so you won’t struggle to get at them in a crisis. It’s important to remember that there could be some pitfalls including the time taken to access you money, any limitations on the number of withdrawals, bonus rates that disappear after a period of time so it’s important to keep a close eye on the return your instant access savings are earning.
2. Notice savings accounts
Notice savings accounts work in a different way to instant access deals. Instead of having quick access to your money when it suits you, saving in a notice account means you’ll have to tell your provider in advance that you want to make a withdrawal. Some notice accounts demand that you let them know you intend to withdraw money 30, 60 or 90 days ahead – so these accounts are unlikely to suit you if you may need to get at your savings unexpectedly.
If you do make an emergency withdrawal from a notice savings account, you’re likely to lose some interest. In the past, notice accounts have offered higher interest rates than instant access deals – but this is no longer always the case. Since the advent of the credit crunch, bank account rates have dropped dramatically from pre-crunch levels. Again, notice accounts are likely to come with variable interest rates – which means it’s important to keep an eye on your return.
3. Regular savings accounts
Regular savings accounts require customers to deposit money each month, without fail – so they are ideal for savers who are just starting out, or who wish to drip feed cash into their account in a disciplined way. Regular savings accounts may limit the number of withdrawals you can make each year, which means it may not make sense to use one for emergency savings.
In addition, a regular savings account is likely to restrict you from investing more than a certain sum each month – preventing you from placing extra cash in your account as and when it suits you. Some regular savings accounts offer impressive-looking rates, but it’s important to remember that because your money will be building up gradually, your overall return might be more modest.
4. Fixed-rate accounts
Fixed-rate accounts offer a fixed interest rate on your cash for a set period of time. While they often come with higher interest rates than instant access, notice or regular savings accounts, opening one will mean giving up access to your money during the term of the bond.
Fixed-rate bonds can extend over one year, two years – even three, four or five years. Generally, the longer you’re prepared to lock your cash away for, the higher your return will be. While it may be possible to get your money out of a fixed-rate bond in an emergency, it’s likely you’d stand Savings 11 to pay a hefty interest penalty for doing so.
Therefore, tying up your cash in a fixed-rate bond is only a good idea if you’re confident you won’t need to get at it. Investing in a fixed-rate bond is one way to protect your savings return in times of falling rates, but be aware the opposite is also true: if you lock your money up in a fixed-rate bond just before rates rise, your cash won’t benefit from the increase. Many fixed-rate bonds require large initial deposits – so if you’re a beginner saver, you may struggle to find a suitable deal.
In addition, some fixed-rate bonds allow you to invest just one lump sum when you open your account, and do not permit additional deposits during the term of the bond. Therefore, these deals are often unsuitable for those who may want to add more to their savings pot over time.
5. Regular Savings Policies
A regular savings plan or an endowment policy (as they were called) is a savings product that you buy from a life assurance company.
They are set up as regular savings plans and at the end of a set period pay out a lump sum. The policy can also include life assurance, so it will also pay out if you die during the term.
This style of saving may be beneficial for you if you
- want to save for a particular event or goal over the long term, usually at least ten years
- understand that the value of your investment can go down as well as up and you may get back less than you invested but could also benefit from better returns than the banks have to offer
- want to receive a non-guaranteed lump sum at the end of your investment term although with some plans guaranteed regular and terminal bonuses can be provided
They generally work by making monthly, quarterly or annual payments and in some cases with part of your monthly payment being used to buy life assurance. How much depends on your age, and how long the plan is for.
The rest of your payment is invested either on a with profits basis or a unit-linked basis. The size of the lump sum you get at the end of your policy often depends on the performance of these investments. Your money may be invested on a with-profits basis.
This means your savings are pooled with other investors’ money and invested by the insurance company in a range of different investments, typically including shares, fixed-interest investments and property. This pool is used to meet the costs of running the insurer’s business and then what’s left over (the profits) are shared with you and the other investors by declaring bonuses that increase the value of your policy.
Alternatively, you can choose policies where you invest on a unit-linked basis. It’s then up to you to decide how you want to invest your money by choosing from a range of different investment funds. These may be funds run by the life insurance company or they might be a range of unit trusts and open-ended investment companies run by separate companies.
You can switch between different funds, if you want to, without cashing in your policy – the first one or two switches are often free but there may be charges if you switch more often. Support in your investment decisions are normally given by your financial advisor.
The value of your unit-linked investments can go down as well as up and you may get back less than you invested. Growth will depend on the performance of the funds you choose. By choosing funds that invests in a variety of investment types, you can weather the ups and downs of the market better.
Money placed in a regular savings plan may not be easily accessible until the end of the policy term and if you do want to end your policy early, you may have to pay a charge or penalty. In addition such plans may be subject to annual fees.
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KIND WORDS FROM OUR CLIENTS
"Just a short note to say thank you for your kind attention and advice.
Your professional, yet friendly approach with simple explanations of the products available together with the benefits and risks and detailing the various processes, potential charges, fees etc. greatly assisted our decision regarding the suitability of the product for our circumstances.
The follow up you then provided in assisting with establishing other necessary contacts e.g.lawyers and your continuing availability for consultation, enabled us to achieve a satisfactory conclusion. "
"Lawsons Equity were able to firstly find out the exact value of my UK pension which I must admit I had almost forgotten about and then helped me to take a lump sum from it earlier than I expected which I was very grateful for and helped me to restart with my business here in Malta"
"I have been worried about my UK pension for some time because the value of it seemed to be going down and down and it was extremely difficult when attempting to contact the correct department and transferred from one to another. Lawsons were able to make contact and apply for a transfer which means I can have an input over where it will now be invested and avoid many telephone calls to the UK"
"I was impressed with the continual communication with Lawsons from the outset. My questions were always answered in a prompt manner and I found them to be extremely efficient throughout my transfer"
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