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Plan A Secure Retirement: It's not the wrapper, it's what's in it that counts

by Trevor Goodbun

Which of the following do you think is the riskiest investment?

• A stocks and Shares ISA
• An Unit Trust
• A Pension
• An Investment Bond

Answer; they are all the same.

These are all examples of investment types. In the jargon they are called wrappers or vehicles. They are like a box that you can place different types of investment. It is the investment, usually called the fund, itself that carries the risk and not the wrapper.

It is often possible to access exactly the same fund though all of these wrappers so the first question you should ask about an investment is not what is it wrapped in, but what are the contents.

There are literally thousands of funds, from protected ones where the aim is defined as “to provide a return of a set amount of capital back to the investor plus the potential for some investment return” to extremely high risk ones.

The wrapper determines how the investment is structured, in particular how it will be taxed. An ISA will usually give a greater return than an investment bond because the former is largely free of tax, but that has nothing to do with how risky it is.

So, as with many other things in life, decide first what the content should be and then the best way to wrap it.













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