Investment warnings (last updated 3 March, 2014)
Investments can fluctuate in value
This means that you might not get back the full amount of your investment.
Past performance is not necessarily a guide to future returns. Market
and exchange rates may cause the value of investments and any “income” from
them to fall as well as rise, and you may not get back the amount originally
invested. Some of the investment funds offered by investment companies
on our discount lists invest in specialist sectors, and they could carry
higher risks in return for higher potential growth/”income”.
Stock markets in emerging markets can be extremely volatile. Investors
should only invest if they are prepared to accept a high degree of
risk. Any investor who is unsure about the risks attached to any fund
should obtain professional advice.
Higher volatility funds
When reading the literature from the investment company you are considering,
you will see that some funds carry a high risk. These investments may
be subject to sudden and large falls in value, and you could get back
nothing at all.
The higher the return advertised, the higher the risk that you may lose
The higher the rate of return you are promised, the greater the risk
to your capital return at maturity.
It could be some time before you may see a return
When making investments that do not have a fixed term, it should still
be borne in mind that it could be some time before you may see a return
on your investment.
If you are looking for “income” from
Taking withdrawals as “income” may erode the capital value
of your fund, especially if the level of “income” taken is
higher than the investment’s growth. Rates of "income" that
you see advertised (headline rates) may depend on certain conditions being
met, they are not usually guaranteed. Often, if the rate of “income” during
the term of an investment is guaranteed, the return of your original capital
If you intend to purchase an annuity with the eventual proceeds of any
investment, your eventual income could be lower if you had taken more
in withdrawals from the previous investment than its growth, or if annuity
rates were low when your annuity was eventually purchased.
Investment funds investing in shares denominated in foreign currencies
Changes in the rates of exchange between currencies may cause your
investment / the income to go down or up.
Front-end loaded contracts (investments where most of the charges are
taken at the start)
With some investments, most of the charges are taken in the early years.
This means that if you withdraw during the early years you may get back
less than you invested. You should bear this in mind when reading the
key features of any investment you are considering, to see how the charges
Fixed term investments
If an investment has a fixed term, you should check the investment
company’s literature for what would happen if you needed your
capital back before the end of the term. The investment company’s
literature would tell you whether you would be able to have your capital
back early, and whether you might receive a very poor return on your
capital if needed during the term.
(Corporate) Bond Funds
Yields offered by bonds often reflect in part the risk rating of the
issuer. Investment in such bonds brings an increased risk of default
on repayment, and this in turn means there is a risk that the capital
value of the fund will be affected. The yield and/or the capital values
of bond funds can fluctuate.
Prices of units in equity funds, and incomes from them, can fall or
rise, and you may not get back the amount invested. With unit trusts,
the manager’s initial charge is part of the bid/offer spread.
Funds invested in emerging or smaller markets, such as Latin America
or some of the markets in the Asia Pacific region, may have a higher
degree of risk and volatility than those in more traditional markets
such as the UK, Europe and the USA. Such risks may be associated with
failed or delayed settlement of market transactions, with registration
and custody of securities, and a possible lack of liquidity and efficiency
in certain of the stock markets or foreign exchange led markets.
Discount brokers cannot normally save investors money on investments
into ongoing investment trusts, because with this type of investment
the charging structure works in a different way, and any commission
paid to the broker makes an extra charge for the client. We can, however,
normally help with cashback offers when NEW investment trusts are being
launched, because normally at that time our commission is a management
expense, so we can receive this without adding to your charges and then
send you a cashback cheque.
Individual savings accounts
The tax advantages of ISAs may be subject to future statutory
Eligibility to invest in an ISA, and the value of tax advantages on
ISA investments will vary according to individual circumstances.
Please read the information provided by your investment company regarding
the rules for investing in Mini and Maxi ISA investments.
Investment bonds – including capital
investment bonds, distribution bonds and with profit bonds
Our understanding of current legislation and Inland Revenue practice
(which may change) as at 14.01.2004 (which may change) is that you can
withdraw up to 5% of your initial investment, each full year the bond
is in existence, up to a maximum of 20 years without incurring any personal
liability to UK income tax or capital gains tax at the time. However,
if withdrawals exceed the 5% allowance, higher rate taxpayers will be
liable for the difference between the higher rate and basic rate of income
tax on the excess over 5%. If the maximum withdrawals allowed by the Inland
Revenue are taken, high withdrawals for income may not be sustainable
during the deferral period. Please refer to the literature supplied by
the insurance company of your choice for information about tax treatment.
ISA transfers (including old PEP investments)
You should consider whether your existing ISA manager will make
exit charges. You should also consider the effect of the difference
between the buying (offer) and selling (bid) price of units for unit
trust ISAs, and initial charges from your new ISA
manager. When transferring from one ISA manager to another,
the holdings are liquidated and a cheque sent from your old
ISA manager to your new one. There could be a loss of income, or
a reduction in the value of the investment you were transferring,
if stock markets rose whilst your ISA transfer was being carried
out. To transfer a ISA, you should complete a transfer application
form supplied by your new manager. The old and new managers will
arrange the transfer between them.
If you re-register a ISA, changing the ISA administration
manager but keeping the same funds, for example moving existing holdings
to a fund market, the units will be moved intact, and will not be affected
by stock market movements.
If you contact your old manager yourself and tell them to sell, you
will lose the ISA status of your investment.
Property funds invest in property and land. This can be difficult to
sell – so you may not be able to sell/cash in a property fund
investment when you want to. The investment company may have to delay
acting on your instructions to sell your investment. The value of property
is generally a matter of a valuer’s opinion rather than fact.
With some property funds, the majority of the charges are taken in the
early years. This could have the effect that if you cash in your investment
during this time you may get back less than you invested. On cashing
in your bond at any time, you might not get back the amount invested.
Self Invested Personal Pensions
The wide investment choice offered under
SIPPs means increased complexity. Active management is needed. A Revenue
approved administrator and trustee are required, resulting in SIPP schemes
having higher setup and annual fees than other personal pension plans.
Fund markets offer SIPPS with a wide choice of collective investments,
but without the option for investing in property or single shares. Some
pension companies offer deferred SIPP plans with standard personal pension
plan charges, and an option to convert to a SIPP with a wide investment
choice and higher charges, should this be required.
Levels of risk for return of capital are described by investment companies
in their literature.
Please read the investment company’s sales literature very carefully.
If when we describe a product, we talk about stock market indices “failing
to recover”; we mean failure to recover to their level at the start
of the investment period.
The word “income” often used to describe regular payments
to the investor during the term of one of these plans. It should be borne
in mind that the more money taken as regular withdrawals (“income”)
during the term of one of these plans, the less capital growth (if advertised)
would be achieved, and the greater the risk to capital return at maturity.
To provide you with the advertised combinations of potential growth/advertised
income, and repayment of capital, investment companies enter into agreements
with other UK financial institutions. Whilst the investment companies
concerned believe these institutions to be financially sound, it is important
to note that if they are not able to meet their obligations you may not
get back your original capital and/or achieve any growth.
References to ‘stock market growth’ exclude any form of income
payment. With these plans, not all of the capital is invested at the outset.
It should be borne in mind that ‘gross’ returns will not be
paid to investors, as maturity benefits will be paid after the deduction
of tax, which is not recoverable.
Please read the investment company’s literature carefully with regard
to taxation, especially whether the return will be treated as income or
capital gains, where the investor may be entitled to a tax free exemption
limit with the added benefit of indexation.
Most of the investments listed by Power Robbins are NOT guaranteed investments,
unless they are described as GUARANTEED INVESTMENTS in the investment
company’s own brochure. The investment company’s literature
for any guaranteed product will say who the guarantor(s) are. For all
other investments, you should note that your capital is at risk.
The Financial Conduct Authority has produced a booklet for potential
investors to read about Capital-at-risk products. We enclose a copy of
this booklet with all requests for fixed term stock market related investments.
Availability dates in our lists could change, particularly if a product
is fully subscribed before the advertised closing date.
For and ISA transfers, where available, you will need to submit
your application earlier than for lump sum investments. The latest
dates for ISA transfer applications will be given in the investment
companies’ literature. We recommend applying for transfers as early
as possible in the offer period.
These are fixed term investments. If you need to withdraw your capital
before the bond matures, you could have a very poor return on your capital.
Venture Capital Trusts
VCTs invest 70% or more of their funds in suitable
UK companies, and may invest up to £2 million in any one company.
Suitable companies for investment have under 50 people working for them,
and assets of no more than £7 million. VCTs must be held at least
5 years to qualify for 30% tax relief. VCTs usually carry a higher risk
than typical equity funds. Charges are usually higher than for most investment
trusts. Often, the only buyer for VCT shares is the VCT itself, so they
may not be easy to sell. This is our understanding of current tax legislation.
With profit funds / with profit bonds
These are not like building society or bank accounts. They are not
deposit funds. They are intended as medium to long term investments
(5 years +). Taxes on with profit funds are paid by insurance companies.
Investors who pay lower rate income tax, or no income tax, would not
be able to reclaim the tax paid by the insurance company. It could be
some time before a person may see a return on the investment. Please
see the paragraph on page 3 entitled “If you are looking for income
from your investment”. Unless you have chosen to take a fixed
amount of regular withdrawals for “income”, the income will
not be fixed, and could go up or down. Future bonus rates are not guaranteed.
Past performance is not a guide to the future. The value of a with profit
fund/bond depends on how much profit the insurance company makes, and
how the company decides to distribute this profit. With some with profit
bonds, the majority of the charges are taken in the early years. This
could have the effect that if you cash in your investment during this
time you may get back less than you invested. Please read about the
Market Value Reduction in the key features. On cashing in your bond,
you might not get back the amount invested.
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