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Follow
our guide to your income options
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So you're close to retirement,
or perhaps you've retired and would like to generate
additional income for your golden years. But with an
array of options to choose from, where do you start?
Follow our guide through the maze of solutions available.
ISAs
Make full use of your annual ISA allowance, as income
produced from an ISA is tax-free.
Corporate bond ISAs
The return on a corporate bond can be tax free if you
opt to shelter it in an ISA. You can put your entire
£7,000 ISA allowance into a Maxi corporate bond ISA
or put £3,000 into a mini corporate bond ISA. In terms
of risk, corporate bond ISAs range from low to medium-high.
Income funds
With a slightly lower return initially than with corporate
bonds (typically 3%), income funds offer a rising income
over time as well as the prospect of growth. The objective
is to achieve high and rising income with capital growth.
With-profits bonds
Considered to be slightly less risky than corporate
bonds, with-profits bonds are stock market investments
that aim to keep your capital relatively safe while
providing income through the annual bonuses declared.
With-profits bonds are also tax efficient, as higher-rate
tax payers can draw up to 5% of the original investment
each year for 20 years with no immediate tax liability.
Zero dividend preference shares
Zeros aim to offer good consistent returns each year
with low risk. In addition, as the return is classed
as a capital gain rather than income, you can offset
it against your annual capital gains allowance (currently
£7,500 for the year 2001/02).
Investment trusts
There are three main types of investment trust that
provide income to some extent: income growth trusts,
high income trusts and split capital trusts. Split capital
trusts as well as offering capital growth, also offer
several types of income-producing shares.
National Savings bonds
Pensioners bonds come with a fixed term of one, two
or five years. They pay out a monthly income that is
fixed at the outset and cannot change. Income bonds
are similar but are open to anyone.
Guaranteed income bonds
These are similar to National Savings pensioner bonds
and building society bonds, but are issued by life insurance
companies. They offer a predetermined rate of interest
for a set period, usually three to five years. The main
advantage is that, if interest rates go down, you are
protected by a fixed rate of income.
Distribution bonds
These bonds are designed to provide income with the
potential for capital growth. Investors can withdraw
the income from the fund on an annual basis or reinvest
the money in the fund to buy additional units.
Whether you have retired or are seeking to generate
additional income, please
e-mail or contact
us for further information. |
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The past
is not necessarily a guide to future performance.
Levels and bases of, and reliefs from, taxations
are subject to change. These investments are
intended as long-term investments. If you withdraw
from these investments in the early years, you
may not get back the full amount invested. National
Savings are not regulated by the Financial Services Authority . Investment values may fall as well
as rise. You may not get back the full amount
invested. Levels of income may vary; levels
of income taken should be reviewed on a regular
basis to ensure that capital is not eroded where
applicable.
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