Frequently Asked Questions

Stocks & Shares ISAs

What is an ISA?

An Individual Savings Account (ISA) is a tax-free savings or investment account. They’re available from banks, building societies, asset managers and investment providers.

With an ISA, you won’t pay any income tax on the interest your ISA generates or the increase in investment value. There are many different types of ISA available, including cash ISAs and stocks & shares ISAs.

The amount you’re able to contribute to your ISA is limited by the ISA allowance. For 2017/18, you can contribute a maximum of £20,000 during the tax year, which refreshes each year. This allowance can vary depending on the type of ISA.

How do ISAs work?

Individual Savings Accounts (ISAs) are a popular tax-free savings option. You won’t pay tax on any interest your account generates or income and capital gains from the investments within your ISA.

There are four main types of ISA, which are as follows:

In a single tax year, you can currently save up to £20,000 in an ISA. This allowance can be split across the different ISA types, or in a single account. The only exception is the Lifetime ISA, as you can only pay in a maximum of £4,000 in a single tax year.

How does a stocks & shares ISA work?

With a stocks & shares ISA, the money you put into the account is invested into an investment vehicle, which could be stocks and shares or bonds, property or commodities.

The return you receive depends on how successful your investment is, as markets can fluctuate.

How much can I invest in an ISA?

For the 2017/2018 tax year, the maximum you can invest in ISAs is £20,000. You can use this allowance in a single ISA — for example, put £20,000 into a cash ISA — or split it across multiple ISA types. The four main types include:

Remember that the Lifetime ISA has a £4,000 limit.

You can split your allowance across multiple ISAs as long as you stick to the £20,000 maximum in a single tax year.

The allowance does not roll over once a tax year ends, so make sure you save or invest before the tax year ends (which ends on April 5th 2018). The new tax year starts on April 6th 2018.

How to invest

If you’re new to investments, you’ll likely have a lot of questions, including how to invest. There are a lot of options out there, take a look at True Potential Investor’s overview of some of the main investment methods available to you:

  • Investing in shares — where you purchase a stake in a company.
  • Investing in cash — placing your money in a savings account or ISA is a form of investment.
  • Investing in property.
  • Investing in bonds — where you essentially loan your money to a company or government.

True Potential Investor offer the following investment accounts:

  • General Investment Accounts (GIAs) — you can hold this type of account even if you have a pension or ISA, as they operate outside of tax wrappers. The accounts do not offer tax relief, but they have few limitations on how much you can pay in and when you can access your money.
  • Personal Pensions — it’s wise to start investing in your retirement early, to build up a suitable fund for retirement. The money you contribute to your pension is invested with the aim of growing it over time. There is no limit to how much you can invest in your pension, but you can only invest up to 100% of your income or £40,000 (whichever is lower) tax free in this tax year.
  • Stocks & Shares ISA — a tax-efficient scheme, you can currently invest up to £20,000 this tax year. Because they have the potential to out-perform inflation, they may be a better choice when it comes to growing your funds than standard cash ISAs.

Before you invest, make sure you have a clear goal in mind — whether it’s short-term or retirement savings. Then, select the most appropriate investment option for you and enlist the help of an investment specialist, such as True Potential Investor.

How many stocks & shares ISAs can I have?

You can have multiple stocks & shares ISA accounts, however you can only pay into one of them each tax year.

You are able to consolidate multiple stocks & shares ISA accounts into one. However, if you do, make sure you are aware of the associated costs of doing so.

True Potential Investor’s stocks & shares ISAs offer a number of benefits, like being able to withdraw your money at any time without losing your tax breaks. You can also reinvest into the ISA within the same tax year using our impulseSave® technology.

You can transfer your existing stocks & shares ISA by completing this form. You could qualify for up to a £500 gift when you transfer.

How to open an ISA

If you’ve decided to open an ISA and are wondering how you do it, it’s best to contact your chosen provider directly. Usually, they will have their own process for opening an ISA.

At True Potential Investor, you can apply for one of our stocks & shares ISAs using our simple online form. Tell us about your goals and select your Portfolio to create your account.

Personal Pensions

What is a pension?

A pension is a long-term, tax-efficient savings method that helps you set money aside for later life and retirement. The money you amass can be used as an income when you retire.

There are a number of pension types available, including state pensions, personal pensions and auto-enrolment workplace schemes.

What is a State Pension?

Once you reach State Pension age, you’ll be able to access your State Pension, a regular payment paid to you by the Government. To be eligible, you’ll need to have paid or been credited with a minimum level of qualifying National Insurance contributions.

What is a Personal Pension?

With a personal pension, you can pay in cash as often you like. The amount contributed is invested with the aim of growing the funds by the time you retire.

Currently, you can invest up to £40,000 tax-free each year, however this does depend on your earnings. You can withdraw your funds once you reach 55.

What is Auto-Enrolment?

Auto-enrolment is a workplace pension organised through your employer. You’ll pay in a portion of your wage, while your employer and the Government will also contribute. Currently, the minimum contribution is 2%, made up of a 0.8% from you, 1% from your employer and 0.2% from the Government. This is set to increase as of April 6th 2018.

How much can I pay into a pension each year?

You can pay any amount into your personal pension in a single year, although there are tax relief limits.

Typically, to receive tax relief on your pension contributions, you can pay in up to 100% of your earnings or the current annual allowance of £40,000, whichever is lower.

How much tax will I pay on my pension?

Typically, you’re able to withdraw 25% of your pension pot without paying tax. You will pay income tax on the remaining 75%. The amount payable as tax depends on your total yearly income and your tax rate.

The tax you pay on your pension will be automatically deducted by your pension provider when you withdraw the funds.

What age can I draw my private pension?

The rules of your pension scheme will detail when you can access your pension pot, although generally it’s normally when you reach 55 years old.

In some cases, you may be able to retire earlier than 55. This applies if your job has a lower retirement age, such as if you’re a professional sportsman, if you have poor health or if the rules of your pension state a lower age.

Those with a workplace pension may need to gain the consent of their present or past employer before they can access the benefits of their pension early.

With a personal pension, you do not need this consent, but early access must be stipulated within the terms and conditions of your contract.

What is a personal pension?

A personal or private pension is a way of financial planning for your retirement. Each month, you’ll contribute an amount to your pension, which you’ll arrange with a personal pension provider like True Potential Investor. You can also make ad hoc contributions as you see fit.

Usually, the money you invest is put into stocks, shares and other investments with the aim of increasing your overall funds ahead of your retirement. You can control where your money is invested, as well as the associated level of risk that you are comfortable with.

For each contribution you make, your pension provider will claim tax relief at the basic rate and add it to your overall pension pot. Higher and additional rate tax payers are usually able to claim more via self-assessment to HMRC.

By retirement, you should have a sizeable pension pot that you can use during retirement. However, the amount you accumulate will depend on the following:

  • The length of time you have saved for.
  • The amount you have paid in.
  • The strength of your investments.
  • Any charges from your personal pension provider that may be deducted.

Once you retire, you can:

  • Leave your pension pot untouched to continue to grow.
  • Access 25% of your pot tax-free.
  • Purchase a lifetime annuity, which pays a regular salary for the rest of your life.
  • Use drawdown to take a regular taxable income.
  • Access small cash amounts and leave the remaining pot to grow.
  • Access all of your pot as cash — the first 25% is tax-free and the remaining 75% is taxed at your highest rate. You may face additional tax charges if the amount in your pension pot exceeds the lifetime allowance. This isalso known as the lifetime allowance charge.

How to set up a private pension

Unlike with workplace pensions, you’ll have to set up your own private pension, should you choose to do so.

The first step is to decide on a personal pension provider, like True Potential Investor. There are many providers available, so it’s important you weigh up the pros and cons to help you find the most suitable provider for your needs. Overall, here are the most important factors to consider:

  • The pension provider’s charges.
  • Rules around the timing and size of your contributions.
  • The available investment options.
  • The transfer options available to you.

Once you have selected a provider, you will need to choose from the different types of personal pensions. These include:

  • Standard personal pensions — you’ll choose from a wide range of investment strategies, with varying levels of risk. Your investments are usually managed on your behalf by your pension provider.
  • Stakeholder pensions — you’ll enjoy low minimum contributions, capped charges and a default investment strategy. Some employers offer this type of pension, although you can set a stakeholder pension up yourself.
  • Self-invested personal pensions — suitable for larger contributions, you have greater control over your pension investments, although this may be unsuitable if you are inexperienced. Unlike standard personal pensions, you’ll manage, deal with and switch your investments as and when you want to. They usually have a higher charge than standard personal pensions.

You’ll then need to decide how to invest your funds. Each option has varying levels of risk, so you should choose the most suitable option for you.

How to set up a pension

A pension is a great way to plan financially for your future once you retire. There are two main types of pensions: personal pensions and workplace pensions.

How to set up a personal pension

With a personal pension, you’ll set aside money for your future into an account with a specialist pension provider, like True Potential Investor. How you set up your personal pension will differ between providers, although the most important factors to consider are:

  1. Your provider
  2. Your pension type
  3. How you’ll invest

You can find out more information about how to set up a personal pension here.

How to set up a workplace pension

Your employer is responsible for setting up your workplace pension. Similar to a personal pension, it’s a way of contributing a proportion of your wages each month towards your retirement with the aim of growing your funds. In many cases, your employer will contribute too, and you may receive tax relief from the Government.

By law, all employers must provide a workplace pension through automatic enrolment by 2018. You will be automatically enrolled onto the scheme if you are an employee who is:

  • Between 22 and the State Pension age
  • Earning at least £10,000 per year
  • Not currently in a pension scheme

You do not need to set up a workplace pension, your employer will do it for you. If you do not meet these requirements, you can choose to opt in, or alternatively, you can also opt out.

How much pension can I take at 55?

When you turn 55, you’ll be able to access your pension pot, unless there are special circumstances where you can access it earlier, such as being in ill health. You’ll be able to access 25% of your pension pot tax-free. Any amount you take after this limit will be subject to income tax.

You don’t have to access your pension pot at 55, rather, you can leave your pot untouched to continue to grow for when you need it more.

How much private pension will I get?

It’s difficult to say exactly how much private pension you’ll have when you retire, as it depends on a number of factors including:

  • How much you pay into your pension pot — the more you contribute now, the more you’ll have in retirement.
  • The performance of your pension — a pot with a greater level of risk tends to grow more quickly than a pot with a lower risk profile.
  • The fees associated with your pension — the charges associated with your pension may reduce the amount you have available in retirement. This is especially true if you have multiple pension pots, where the fees you’re paying may total more than your pot grows.
  • The age you start contributing — starting to contribute to your pension early will give you longer to generate the funds you need for retirement.

When considering how much you’ll need in retirement, remember that you can essentially ‘top-up’ your pension pot with your state pension. This is currently £122.30 per week, although the amount you receive depends on your personal circumstances. More information about your entitlements can be found on GOV.UK.

How to invest

If you’re new to investments, you’ll likely have a lot of questions, including how to invest. There are a lot of options out there, take a look at True Potential Investor’s overview of some of the main investment methods available to you:

  • Investing in shares — where you purchase a stake in a company.
  • Investing in cash — placing your money in a savings account or ISA is a form of investment.
  • Investing in property.
  • Investing in bonds — where you essentially loan your money to a company or government.

True Potential Investor offer the following investment accounts:

  • General Investment Accounts (GIAs) — you can hold this type of account even if you have a pension or ISA, as they operate outside of tax wrappers. The accounts do not offer tax relief, but they have few limitations on how much you can pay in and when you can access your money.
  • Personal Pensions — it’s wise to start investing in your retirement early, to build up a suitable fund for retirement. The money you contribute to your pension is invested with the aim of growing it over time. There is no limit to how much you can invest in your pension, but you can only invest up to 100% of your income or £40,000 (whichever is lower) tax free in this tax year.
  • Stocks & Shares ISA — a tax-efficient scheme, you can currently invest up to £20,000 this tax year. Because they have the potential to out-perform inflation, they may be a better choice when it comes to growing your funds than standard cash ISAs.

Before you invest, make sure you have a clear goal in mind — whether it’s short-term or retirement savings. Then, select the most appropriate investment option for you and enlist the help of an investment specialist, such as True Potential Investor.

How much to save for retirement

Knowing how much you need to save for retirement is based on a number of factors, many of which will be individual to you.

According to our polling of over 30,000 people, £23,000 is needed annually to live comfortably in retirement. However, people in the UK are on course to receive just £6,000 once they retire.

The actual amount you will need in retirement will depend on a number of factors, including:

  • The outgoings you will have in retirement — usually, outgoings are less at the beginning of your retirement, as by then you might have paid off your mortgage or your children may have moved out. However, as you age, you may need to pay for care, meaning you may require more funds in retirement.
  • The amount you’ll receive from your State Pension — you can use your State Pension to essentially top up your retirement fund. At present, the State Pension is £122.30 per week, although this does increase ever year. You’ll need to reach State Pension age before you can access these funds, so keep this in mind when planning for your retirement. You can find out your state pension age at the GOV.UK website.
  • The age you will retire — naturally, the earlier you retire, the more years you’ll need to use your pension for. If you are planning to retire early, you’ll often need a larger pension pot to support you.

The age you start contributing towards your pension could impact the size of the monthly instalments you pay. If you start contributing later in life, you may have to increase the amount you contribute to meet your overall pension goal.

Start saving for your future with True Potential Investor’s personal pension accounts.

How do private pensions work?

Private pensions are a way of building up a retirement fund that you can use in later life. You’ll contribute to the pot usually over a number of years, which is invested with the aim of growing the fund by the time you retire.

There is no limit to how much you can invest in your pension, but you can only invest either £40,000 or up to 100% of your income, whichever is lower, tax free in this tax year.

Currently, you can access your private pension from the age of 55, although this is set to rise to 57 by 2028. When you reach retirement age, you can withdraw your pension as a lump sum or take a regular income over time.

You won’t pay tax on any income or capital gains generated from your private pension, and you’ll receive tax relief on the contributions you make. When it comes to accessing your pension, you will typically have a 25% tax-free allowance, meaning you can:

  • Take the whole pension amount, with 25% typically tax-free and 75% as taxable income.
  • Take a typical 25% lump sum tax-free and take a regular income from the rest over time. You will pay tax on the remaining 75%,
  • Take a regular income — 25% of which is typically tax-free — and no lump sum.

Learn more about True Potential Investor’s personal pension accounts.

What can I do with my pension pot?

You’ve contributed to it for many years, but what can you do with your pension pot? When you reach the current retirement age of 55, you’ll be able to access your funds, so it’s important to understand your options:

Take your whole pension as a lump sum

If you choose to receive your entire pension as a lump sum, you can typically access 25% as a tax-free lump sum, while the remaining 75% will be taxed as income.

Access a typical 25% tax-free lump sum and take an income from the rest

With this option, you’ll typically receive a 25% tax-free lump sum. With the remainder of your pension, you can purchase an annuity, which provides an annual income for the rest of your life. With our personal pension accounts, you can use flexible drawdown to take an income from your pot. This income is taxable.

Take all of your pension pot as an income

Instead of taking a lump sum, you can simply take a regular income, typically receiving 25% tax-free.

Leave your pension pot untouched

You can access your pension from 55 years old, but it doesn’t mean you have to. You could leave your pension pot untouched and keep contributing until you need it, offering greater growth potential.

By fully understanding your options, you can choose the most suitable for you in retirement.

How many pensions can you have?

With personal pensions and employers now being legally required to offer a workplace pension, many people now have more than one pension.

In fact, there is no limit to the number of pensions you can have or the amount that’s in your pension.

However, you need to consider whether having multiple pension accounts is beneficial. For example, you may be paying multiple account management and investment fees which, depending on the performance of your investment, may significantly impact how much your account is actually growing — if at all.

If this is the case or if you’re struggling to keep track of multiple pots, it may be wise to transfer your pensions to reduce the number of funds you have with the aim of improving the overall return you receive.

How much pension can I take tax free?

When you reach retirement age and decide to access your pension pot, you’ll typically receive 25% of the total amount tax free. There are two ways you can access your tax-free amount:

Take a typical 25% as a tax-free lump sum

You can typically take 25% of your pension as a lump sum and you won’t pay tax on it. If you choose to do so, with the remaining 75% you could purchase an annuity, take an adjustable income through drawdown or take what’s left as cash.

Spread your tax-free allowance across multiple withdrawals

If you choose to take multiple, smaller lump sums from your pension over time, you can typically claim your 25% tax-free allowance on each withdrawal you make. For example, if you withdraw £1,000, £250 will not be taxed, you will only be taxed on the remaining £750.

Ready to invest in your future? Set up your personal pension account with True Potential Investor today.