When it comes to savings, you may well find yourself daunted by the sheer variety of ways to invest your money. Particularly if you find yourself with a substantial amount to invest, and are less than confident at dealing with things like the stock market, bonds and trusts, you're likely to gain from professional expertise. The main issue here is trust ? you want to be sure your money is being used to its full potential and whoever you entrust it to must be someone you have total confidence in.
If you have a basic understanding of how savings and investments work, however, it will be a lot easier to make judgements about the reliability and efficiency of individual advisers.
Independent Financial Advisers
Usually you will not be charged for general advice, but the adviser will gain commission when he or she sells you particular products. Don't be afraid to ask about commissions ? a good adviser should be open and transparent about such matters. They are duty bound to find out all relevant information about you and then give ?best advice? ? which means selling you the products that are most suitable for your situation.
Accountants
Accountants normally advise on book keeping and tax, but sometimes also give advice about investments. If involved with investing, they must belong to one of the Recognised Professional Bodies responsible for regulating their business. These include the Institute of Chartered Accountants and the Association of Chartered Certified Accountants.
Stockbrokers
If you are dealing on the stock market, you will need to buy and sell your shares through a broker. If you want advice on your investments, choose a traditional stockbroker. On the other hand, there are brokers that offer a dealing-only service, and this is a cheaper way to buy and sell shares. Stockbrokers charge a commission on deals, and a traditional brokers service should include advice. www.londonstockexchange.com provides detailed advice and ways to locate a broker.
The Financial Services Authority regulates all these professionals ? if you are unsure about the credentials or dealings of someone check with them to verify that they are legitimate and are operating fairly. The FSA website also has details of what to do if you are unhappy with the service you've received from a finance professional ? check www.fsa.gov.uk. Once again, the government's advice site has sound information on the basic principles ? and links to other information sites. www.direct.gov.uk
Putting a proportion of your earnings towards a pension may seem like a drag right now, but realistically you will need to save for as long as possible to gain a decent income in later years. Not only this, but there are substantial benefits to saving into a pension - you're not taxed on contributions and there may be additional extras such as life insurance or lump sums included in your scheme.
These days people are investing more and more in private pension schemes and long term savings - the state pension is likely to become negligible with an ageing national population.
State Pension
At present, the basic pension for a single person is £82.05 a week. This depends on you having made sufficient National Insurance Contributions over your working life. Even if you have paid off your mortgage by the time you retire, would this be enough for you to live on? Bear in mind that the age when you can claim your pension (currently 65 for men, 60 for women) is highly likely to rise in the near future, and keep on rising.
Company Pensions
Employers are likely to offer some form of pension scheme. The terms and details of these vary from company to company, but usually fall into one of two basic types: 'final salary' schemes, based on your salary and how long you've been paying into the pension; and 'money purchase' schemes, which depend on the amount contributed into the fund. When you retire, you then buy an annuity - a type of insurance which will pay you a regular income. A money purchase scheme can be more flexible, but slightly more risky.
Personal Pensions
These schemes offer a lot of flexibility, and there are several different ways to invest, including investment trusts and unit-linked schemes that depend on share prices. Personal pensions operate in roughly the same manner as company pensions, only you have more control over your investment. Currently there are limits on the contributions you can make to personal pensions, but these are set to change in 2006.
The rules on pensions are changing all the time, and are likely to undergo radical changes in the next few years. For up to date advice, check the Pensions Advisory Service at www.pensionsadvisoryservice.org.uk
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