Sowing the seeds of wealth management

Whether you dream of buying a boat, a chalet in Switzerland, or simply getting the children through university, long-term investment planning should be an intrinsic part of your wealth management strategy, as a means to achieve your financial aspirations.

Having readily available cash may enable you to respond swiftly to potential investment opportunities, but inflation can chip away at your purchasing power on a daily basis. And in the current climate some of the best easy-access savings accounts offer less than a 2% return.

Faced with what many would consider fairly poor returns on your savings it may well be worth considering a range of longer-term investment options.

ISAs and NISAs

Investing your cash into an Individual Savings Account (ISA) has become significantly more attractive. 2014 saw new rules introduced where ISAs were changed to NISAs (New ISAs) and the maximum amount you could invest tax efficiently raised from £11,520 per year to £15,000, this amount was raised further in April 2017 to £20,000. From 6 April 2018 the amount remains unchanged allowing for an investment of £20,000 into a cash ISA, stocks and shares ISA, innovative finance ISA or a lifetime ISA (up to the lifetime ISA limit) or any combination of the four.

Market Linked Deposits

For those with previous experience of the stock market, Market Linked Deposits (MLDs) may be another option. One of the benefits of MLDs is that they are designed to offer stock market linked returns without exposing the money invested to losses as long as the deposit is held until maturity. Market Linked Deposits operate to a pre-determined timeline at the end of which the aim is the investor receives their original investment plus any interest depending on performance. There is no guarantee of an additional interest payment.


If you have made maximum use of your entire ISA allocation and still have cash available, other long-term investment strategies remain. One of the longest available to most people is their pension and the associated tax reliefs and allowances available.

Pension options include personal or stakeholder – where your investments are managed for you within a fund – or self-invested personal pensions (SIPPs) – a form of personal pension that allows you to choose and manage your own investments.

Chancellor Osborne announced a landmark liberalisation of pensions in the 2014 Budget. The reforms mean that, as of April 2015, it is no longer compulsory to use your accumulated pension pot to buy an annuity: a type of insurance that pays out a fixed annual income after retirement. Pension savers are now able to draw down from their pots at their personal rate of tax after taking the 25% tax-free lump sum, rather than at the previous 55% tax rate.


As with any investment, there is a trade-off between risk and reward, but UK Government debt, gilt-edged stock or ‘gilts’, offer a fixed-interest return and are generally regarded as low-risk and reliable. The level of return is affected by inflation and the price at which you bought the gilts – the more you pay, the lower the return on your investment.

Inflation-linked gilts can counter the inflation risk, although returns are obviously still affected by the buy and sell prices. Bank of Scotland has a range of investment tools available to customers to be able to track indices and help you keep up to date with markets.


The stock market is a relatively more volatile investment avenue but can potentially deliver both regular dividend income returns and medium- to longer-term capital growth – when companies and the markets in general perform well.

Shares can, of course, go down as well as up so investors should do their research and tread carefully. The duration of your investment can be crucial. Holding equities long-term can sometimes deliver inflation-beating returns– provided you are financially able and it is appropriate to invest taking account of your circumstances and attitude to risk.


Where equities are typified by relative high risk with high potential return, gold, by contrast, is widely considered to be a "safe haven" investment during bouts of investor nervousness. As an asset class, gold is generally seen as a preserver of value over the long-term but can be highly volatile in the short- to medium-term.


Whatever your investment criteria or risk appetite there could be an investment fund or trust to suit. These aim to reduce risk by pooling investors’ assets and allow you to invest in different geographies, sectors or stocks. Options include generalist or specialist funds, or funds-of-funds: best-of-breed portfolios of different funds.

The key here lies in choosing your fund manager extremely carefully, being aware of your fund running costs – like dealing and management fees – and keeping a close eye on your investments’ performance. As time passes and markets fluctuate, as they inevitably do, what might have seemed like a good investment three years ago may not be so now.

The value of advice

Whatever you decide to adopt as a long-term investment strategy, and spreading the risk is always wise, never underestimate the value of advice. The financial turmoil of recent years has merely underlined the importance of seeking expert help. Getting expert advice takes the strain out of planning for the future – and could be key to achieving those longer-term goals.

Important Information

Any views expressed by Bank of Scotland Private Banking are our current in-house views as at September 2015 and should not be relied upon as fact and could be proved wrong. This article was prepared as at September 2015. The information and opinions may not be accurate after this date.

As with all professional advice, there will be a charge for our services. We recognise that financial advice may not be for everyone so before you commit to any charges we will ensure you understand the basis of our advice and the level of charges that will apply.

Tax treatments depends on individual circumstances and may be subject to change in the future. Past performance is not an indication of future performance and cannot be relied upon. The value of investments and the income from them can go down as well as up and cannot be guaranteed. The forecast of future performance is not a reliable guide to actual future performance.

Bank of Scotland plc. Registered office: The Mound, Edinburgh, EH1 1YZ. Registered in Scotland, no. SC327000. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under number 169628.

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