ISAs, SIPPs and GIAs

SIPPs

SIPPS are the most tax efficient way to save for your retirement, providing a return of income tax at your highest level (subject to relevant earnings and the £60,000 annual contribution limit).

Your fund then grows completely free of income and capital gains tax and 25% of your withdrawals are tax free. The balance is taxed as income at your marginal rate, which can be lower in retirement than the rate you were paying when contributing.

There is a £268,275 limit on the tax-free cash element and a £1,073,100 limit on combined tax-free lump sums and death benefits before age 75.

Self Invested Personal Pensions

Introduction

Often misunderstood, ISAs, SIPPs and GIAs are not investments, they are the accounts in which you hold your investments. Each has their own different rules and tax treatment and Vanquish offers them all - without the usual platform charges.

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ISAs

ISAs are highly flexible tax free savings accounts. There are two main types, Stocks & Shares ISAs and Cash ISAs, plus additional subsets (Junior ISAs, Lifetime ISAs, Innovative ISAs).

You can invest up to £20,000 each year (£9,000 for a Junior ISA) and all growth, income and withdrawals are completely tax free. Unlike SIPPs there is no limit on the value your ISAs can grow to.

A major attraction of ISAs is that your money is not locked in until retirement, meaning that you can access it at any time and therefore use the tax free benefits for other purposes, such as a property deposit, school fees or general savings.

Individual Savings Accounts

GIAs

GIAs, or General Investment Accounts, are taxable investment accounts. There is no tax relief on contributions and income tax is payable on any income generated (such as interest or dividends). There is also capital gains tax on any growth, payable when assets are sold.

The main advantage of these accounts is that there are no limits on how much you can contribute, and no restrictions on withdrawals - unlike ISAs or pensions.

You can use your income tax, dividend, and capital gains tax allowances to reduce liability, but using your ISA and Pension/SIPP allowances first is usually more tax-efficient.

General Investment Accounts

Children

Investing money on behalf of your children at an early age can give them a significant head start in life. Junior ISAs are specifically designed for this purpose, without impacting on your own personal allowances.

You can invest up to £9,000 per year for each child, making the investment decisions on their behalf, and all returns are completely free of tax.

When they turns 16, they can take over the investment decisions, but they cannot access the funds until they turn 18.

This period between control and access can help instil an early interest in investing.