25 Year Savings Plan? What Product Is Best?

What could you do with a 25-year savings plan? How much could you save? It, of course, primarily depends on how much you are willing or able to put away every month. A huge factor is also which product you choose to save or invest your money in. Read our guide to find out what options could be available to you.

You’ve Got 25 Years

So you’ve got 25 years. But how do you want to save? Do you have a lump sum to get you started? Or will you be putting money away every month? There are also numerous products available on the market. High Street banks, Friendly Societies, Building Societies, and specialist financial service providers will all try and sell you a dizzying array of products.

And once you’ve decided on your provider, it’s time to settle on a product. Do you want a stocks and shares ISA? a Cash ISA? an Investment Bond or a Tax Exempt Savings Plan?

What age are you? If you are less than 25 years from retirement, your plan could be part of your pension policy. If the plan is for a child, you could start them off with a Junior ISA.

Those aged between 18 to 39 can access a Lifetime ISA – but you would have to use the funds towards a first home – or towards retirement.

So let’s take a look at some of the main options available.

Stocks and Shares ISA

Available to UK residents aged 18 and above, a stocks and shares ISA (also called an investment ISA) could be a way of investing your funds over a 25-year term whilst benefitting from tax-free compound growth on your plan.

An investment in a stocks and shares ISA over 25 years has the potential to see significant growth of your funds. Over this length of time, it would be advisable to seek out a low charge ISA – you will be able to read the charges on the key information document. There is a huge range of stocks and shares ISAs available – read our guide here on how a stocks and shares ISA works.

Cash ISA

Available to the same criteria as above, a cash ISA may not be ideal for a long term investment due to very low interest rates. Whilst a cash ISA is perceived as a ‘safe’ bet when saving money, indeed, the value of your savings will not decrease. However, with only very low interest rates on offer, you could run the risk of the value of your money depreciating in real terms with the effects of inflation on your fund.

Tax-Exempt Savings Plans

These plans are offered by Friendly Societies and invariably are available for a minimum of ten years investment, which can, in some cases be extended to 25 years. Beware of high fees on these products and poor choice of funds. Although they may be considered an option if you have already used up your ISA allowance for the year.

Savings Accounts Offered by a Bank

Not a good vehicle at all for 25 years worth of savings. The interest rates will be very low, they are not tax-efficient and are really only suitable for short term savings.

Junior ISA

Designed for children – Junior ISAs can be opened from birth and accessed by the child on their 18th birthday. If planning for 25 years of investment growth for a child, the Junior ISA converts into an adult ISA once they turn 18. So your child can continue to benefit from tax-free savings into adulthood.

The above is provided for information only – and is not advice. You should always be aware that in the case of investments, the value of your money can go down as well as up and you could get back less than you put in.

Remember for any investment plan, always read over the key information document which will provide you with full details of the selected funds and any charges levied.

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