Medium-term savings and investments

If you're happy to tie up your savings for 5-10 years (or more) here's an at-a-glance guide to your medium term saving options:

Summary

Stocks & Shares ISAs	Mutual Funds	Onshore bonds	Offshore bonds	Share Incentive Plans (SIPs)
A great top-up investment which allows you to invest free of Capital Gains Tax and allows you to invest up to £11,520 each tax year. If money is invested in a Cash ISA in the same tax year the annual Stocks and Shares allowance would reduce accordingly.	These are professionally managed funds, including unit and investment trusts and open ended investment companies. Suitable if you want to invest for income, growth, or both.	These can be flexible and tax efficient. There are two main types of Onshore Bond: Unit Linked and With Profits Bond.	There are additional tax benefits to investing offshore, which can help with retirement and estate planning or if you are planning to live or work abroad. These usually offer a wide investment choice.	A tax efficient way to save, which enables you to buy shares in your employer. The shares are kept in a trust for you until you leave your job or sell the shares.

Tax treatment

Stocks & Shares ISAs	Mutual Funds	Onshore bonds	Offshore bonds	Share Incentive Plans (SIPs)
ISAs don't have to be declared on your tax return and any growth earned is tax efficient.	The same tax rules apply to a mutual fund as they would if you directly owned the equities and bonds held by the fund. Capital Gains Tax (CGT) may be payable on any income or capital growth achieved.	You are able to make tax deferred withdrawals of up to 5% of your original investment each year, for up to 20 years. Withdrawals of over 5% could trigger an immediate tax charge.	You won't normally pay tax on any growth until you take money out of the bond. The exception to this is irrecoverable withholding tax, which is deducted from dividends and interest payments in some countries. For information on tax on withdrawals see previous Onshore bonds column.	Keeping the shares in the allocated trust for a specified period (depending on your employer) will enable you to receive the full tax benefits.

How to make payments

Stocks & Shares ISAs	Mutual Funds	Onshore bonds	Offshore bonds	Share Incentive Plans (SIPs)
Regular payments or a lump sum, up to a maximum of £11,520 per tax year.	You can make regular payments, for example monthly or quarterly; you can also pay in lump sums.	You can only make lump sum payments and there is a minimum investment, usually in excess of £1,000.	Normally, you can pay lump sum payments with a minimum single payment of £20,000. You can then add additional single increments to your bond but there will usually be a required minimum amount.	Shares are paid for through your salary or you could set up a Save As You Earn Scheme, which is a tax-efficient cash saving scheme that allows you to save towards buying shares in the company.

When you can withdraw money

Stocks & Shares ISAs	Mutual Funds	Onshore bonds	Offshore bonds	Share Incentive Plans (SIPs)
Whenever you want, but you can only invest the money back into the ISA in the same tax year, (providing you have not already used up the annual investment limit - currently £11,520).	You can make withdrawals whenever you want, by selling some or all of your investment in the fund or funds. You may need to leave a minimum amount if you wish the investment to continue in the future.	You are likely to be able to choose from monthly, quarterly, termly, half yearly or annual regular withdrawals. You don't have to cash in the whole bond if you need to take money out once you have invested. For Unit Linked Bonds you will be able to switch between different investment funds.	You can make one-off and regular withdrawals, but minimum amounts may apply (this can vary from provider to provider). It's not necessary to cash the whole bond if you need to take money out. Once you have invested in a bond you will also usually be able to switch between the different investment funds.	You have the option to sell whenever you like, or keep the shares in the trust until you leave.

Pros

Stocks & Shares ISAs	Mutual Funds	Onshore bonds	Offshore bonds	Share Incentive Plans (SIPs)
A tax-efficient way to save a sum of money, and you can make withdrawals whenever you want. An easy way to access the potential upside that investing can bring.	There is a large selection of funds to choose from covering equities, bonds, cash and property. There is no limit to the amount that you can pay in.	You won't have to pay tax on any capital growth until the end of the Bond term or on withdrawals, unless you withdraw more than 5% in one year which could trigger an immediate tax charge. Bonds allow you to switch between funds.	There are tax benefits and you are able to make regular withdrawals. Offshore bonds can offer a wide range of funds.	If your company is doing well, then you are able to reap the additional benefits, plus you can cash in the shares whenever you wish.

Cons

Stocks & Shares ISAs	Mutual Funds	Onshore bonds	Offshore bonds	Share Incentive Plans (SIPs)
If you have made a withdrawal, you can only invest the money back into the ISA in the same tax year (providing you have not already used up the annual investment limit). You can only invest up to the prescribed limits each year.	There are no inherent tax advantages, unlike a Stocks and Shares ISA, and the amount of tax payable is determined by your personal tax rate (CGT).	The minimum investment is usually £5,000 with additional investments at £1,000.	This is not for short term investing and one off and regular payment limits can be high.	Share prices can fall and you may also lose tax benefits or forfeit some shares when you leave the employer.

Important information and assumptions

References to legislation and taxation are based on Standard Life's understanding of law and HM Revenue and Customs Practice. Legislation and taxation are liable to change in the future.