SELECTING THE
RIGHT SAVINGS
ACCOUNT
3 ESSENTIAL CONSIDERATIONS
Research has revealed that the average UK worker has
seen their income reduce by almost 10% in real terms
(when adjusted to account for the impact of inflation)
since 2008*. Making incomes stretch further means that
saving has been a challenge for many.
But as a busy professional, you know it’s sensible to make
the money you put aside work as hard as you do, in order
to achieve your future goals.
Choosing where to put your money can seem
daunting – there’s a wealth of savings accounts
to choose from, each with varying rates of
interest, access criteria, deposit requirements,
and so on.
}} the value of establishing clear
savings goals
We understand that selecting the right savings
account for your individual needs can be time
consuming, and sometimes confusing - so
we’ve put together this straight talking eGuide
to help you focus on 3 key considerations that
you may not have thought of.
}} how to select a provider with a
customer focused culture.
So, before you select a savings account for
your hard-earned money, invest a little time in
reading on to discover:
}} what you need to know about
the introduction of the Personal
Savings Allowance
This eGuide is not intended to give you a
comprehensive explanation of all the factors you
need to consider. The best savings product(s) for
you will depend on your individual circumstances
and you may want to seek professional advice
before making a final decision.
*The London School of Economics and Political Science, March 2015
1. ESTABLISHING
CLEAR SAVINGS GOALS
Just stop and think for a minute about where you see yourself in
5 or 10 years time – or even further down the line? What would
you like to achieve and how much do you think it would cost to
realise those dreams?
It’s good to start planning your financial future as early as
possible to make your dreams a reality. Failing to clearly identify
your savings goals can mean you run the risk of not being
able to afford the things you want, because you didn’t put the
necessary funds in place early enough.
We asked over 400 professionals what they were saving for - top of their lists included:
New car
Once in
a lifetime
holiday
Deposit
for a new
house
Reserve money Reserve money
Children’s
to cover 9
to cover 10
School and
months’ salary months’ salary University fees
Teachers
3
3
3
3
Lawyers
3
Dentists
Doctors
3
3
3
3
3
3
3
3
Deposit for
their childs
house
Total needed
to cover
these items
£128,372
£288,370
£301,279
3
3
£420,904
Research based on a survey of 417 professionals (including 106 teachers, 100 lawyers, 109 dentists and 102 doctors) by Censuswide
on behalf of Wesleyan, March 2015.
By establishing clear savings goals, you can identify whether
you intend to meet them over the short - (0-5 years),
medium - (5 -10 years), or long-term (10 -15 years).
This simple consideration will help you to identify:
}} how much you will need to save each month, or year, in order
to stay on track towards meeting your goals
}} whether you will need easy access to some, or all, of your
savings at short notice, and without incurring a financial penalty
}} which type of savings or investment might be best for you.
For example, are you willing to invest in property or stocks
and shares, which may mean leaving your money tied-up over
the longer term in order to ride out potential fluctuations
within property or financial markets
}} whether you should explore financial products designed to
meet specific goals (such as saving into a Junior ISA for your
child’s future).
2. WHAT YOU NEED
TO KNOW ABOUT THE
PERSONAL SAVINGS
ALLOWANCE
The Personal Savings Allowance will be introduced in April
2016. From this point, Banks and Building Societies will stop
automatically taking income tax from the interest earned on
non-ISA (Individual Savings Account) savings.
Inflation rates (Consumer Price Index - CPI) are currently very
low 0.2% (Dec 2015), and the Bank of England is predicting
average annual inflation to rise to 1.2% by Q4 2016, with a longer
term target of 2%†.
If your total taxable income is less than £17,000 you won’t pay
tax on any income earned from savings.
For the purposes of this illustration, let’s assume that the rate of
inflation is 2% (based on the Bank of England long term target).
If you put £10,000 into a bank account with 0% interest, in real
terms it would be worth:
Your Personal Savings Allowance will depend on whether you’re
a basic, higher or additional rate tax payer:
Highest rate of income tax
you pay
Personal Savings
Allowance
Basic
£1,000
Higher
£500
Additional
No entitlement
The introduction of the Personal Savings Allowance has led some
people to question whether there is an ongoing need for ISAs. ISAs
are tax free and, for the 2016/17 tax year, anyone:
}} £9,800 in 1 years time
}} £9,039.21 in 5 years time
}} £8,170.73 in 10 years time.
So, unless you put your cash into a savings account where the
interest earned outperforms inflation, its value could decrease
in real terms.
The With Profits ISA
}} 16 or over can save up to £15,240 in a cash ISA
Holding your savings in a variety of asset classes can help you
to protect them against sharp turns in the stock market and the
affect of inflation on cash savings.
}} 18 or over can save up to £15,240 in a cash ISA, Stocks and
Shares ISA, Innovative Finance ISA or any combination of
the three.
The Wesleyan ‘With Profits ISA’ is a Stocks & Shares ISA which
accepts new investments into Wesleyan’s With Profits Fund with
the tax advantages of an ISA.
Please note Innovative Finance ISAs are being introduced from
6 April 2016, to allow interest and gains from peer to peer loans
to qualify for the tax advantages of an ISA.
The With Profits Fund aims to provide capital growth over a
medium to long term period by investing in UK and International
shares, fixed interest stocks, property, cash and other related
investments. The fund aims to avoid sharp rises and falls by
‘smoothing’ the return on your investments over the period of
the plan.
How inflation can erode the value of your cash savings
Keeping money in cash savings, (rather than other asset types such
as stocks and shares) is often considered as low risk. But low risk,
doesn’t mean no risk.
Simply put, inflation is a measure of how much you can buy
with your money, or what it is ‘worth’ in real terms (£1 today, for
example, buys you much less than it would have 100 years ago).
This product is designed for those who are willing to invest for
a minimum of five years with the potential for long term capital
growth and income, who are also prepared to accept that when
the investment is cashed in, the value might be less than has
been paid in.
Source: BoE Inflation Report, Nov 2015
†
3. SELECTING A PROVIDER
WITH A CUSTOMER
FOCUSED CULTURE
Opening a savings or investment account is the start of your
relationship with the provider you choose. It’s important to
consider how easy you feel it will be to communicate and
interact with them over the years. Here are some questions to
think about to help you assess a potential providers ‘customer
focused culture’:
}} Does the provider proactively promote information about
their most recent customer satisfaction ratings?
}} How often will the provider send you a statement so that you
can check the progress of your savings towards your goals?
}} Is there a helpline you can call with queries about your
account, or its performance? Is it UK based, and what are the
opening hours?
}} Are there shareholders that the provider needs to satisfy
when making short-term commercial decisions about where
to invest your money? Would you prefer the culture offered
by a ‘mutual’ or ‘friendly society’ who work exclusively for the
interests of their members?
Selecting the right savings or investment account for you
requires careful consideration. You need to look beyond the
headline grabbing interest rates and work out what you are
saving for; how you will spread and manage the risks; and which
provider is most likely to pro-actively help you achieve your
financial goals.
If you would like help thinking through your savings options,
you can arrange a no-obligation appointment with a local
Financial Consultant: [email protected]
Please remember to include your name; postcode; occupation;
and quote reference number 80648. We need this so that
the Financial Consultant who contacts you is local to your
area, and has specialist training in understanding the financial
considerations specific to your occupation.
If you would like to find out more information or apply
for a Wesleyan With Profits ISA online, please visit:
wesleyan.co.uk/investments
For all your financial needs:
}} Savings and Investments
}} Retirement Planning
}} Life and Income Protection
}} Mortgages and Insurance
For further information, please call 0800 107 1429
Or visit: www.wesleyan.co.uk
If you would like this document in Braille, large print or audio format,
please contact 0345 351 2352.
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Head Office
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‘WESLEYAN’ is a trading name of the Wesleyan Group of companies.
Wesleyan Assurance Society is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.
Incorporated in England and Wales by Private Act of Parliament (No. ZC145). Registered Office: Colmore Circus, Birmingham B4 6AR. Telephone: 0345 351 2352. Fax: 0121
200 2971. Telephone calls may be recorded for monitoring and training purposes.
Advice is provided by Wesleyan Financial Services Ltd.
‘WESLEYAN’ is a trading name of the Wesleyan Group of companies. Wesleyan Financial Services Ltd (Registered in England and Wales No. 1651212) is authorised and
regulated by the Financial Conduct Authority and is wholly owned by Wesleyan Assurance Society. Wesleyan Assurance Society is authorised by the Prudential Regulation
Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Incorporated in England and Wales by Private Act of Parliament (No.
ZC145). Registered Office: Colmore Circus, Birmingham B4 6AR. Telephone calls may be recorded for monitoring and training purposes.
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WFS-WP-45 02/16