ISA & OEIC FAQs

Frequently asked questions

Individual Savings Accounts (or ISAs) are a tax-efficient way to save or invest. You don’t pay Income Tax or Capital Gains Tax on income or gains from funds held in an ISA.

Stocks and shares ISAs offer the potential for growth or income or for a combination of both and are designed for investments to be held for the medium to long term (at least 5 to 10 years).

Features

  • Invest tax-efficiently. In 2018/2019 tax year, you can save up to £20,000: The ISA Allowance is set by the Government (HM Treasury) each tax year
  • Choose from a wide range of investment funds managed by industry experts
  • Suitable for a range of risk appetites
  • No minimum or maximum investment period
  • Choose to invest for income, capital growth or a combination of both. Please note that if the withdrawals you make exceed the level of any investment growth, then your fund value will be eroded.
  • No charge when accessing your investment
  • Easily transfer in your ISA from another provider
  • Able to switch between most funds
  • You can transfer between different types of ISAs.

The value of your investment and any income from it is not guaranteed, it can go down as well as up. You may not get back the original amount you invested.

The ISA allowance is set by the Government (HM Treasury) each tax year. Any unused allowance cannot be carried over into the next tax year.

Because of US legislation, if you are or become resident in the US, you won’t be able to hold any shares in our ISAs. We’ll write to you to advise you of your options and that we’ll have to sell your shares.

An Open Ended Investment Company (or OEIC) is a popular way to invest in the stock market. We sometimes call this a Collective Investment Plan. When you invest in an OEIC fund your money is pooled with that of other investors. This means it can be spread across a far wider range of investments, for example equities and/or fixed interest securities, helping you to spread the risk to your money. OEIC funds offer the potential for growth or income or a combination of both and are designed to be held for the medium to long term (at least 5 to 10 years).

Features

  • Choose from a wide range of OEIC funds managed by industry experts
  • Suitable for a range of risk appetites
  • Choose to invest for income, capital growth or a combination of both. Please note that if the withdrawals you make exceed the level of any investment growth then your fund value will be eroded.
  • If you want to be as tax efficient as possible, you can also choose to invest in most of our OEIC funds through an ISA
  • No charge when accessing your investment
  • Able to switch between most funds
  • Able to invest on behalf of your children. The OEIC would be in your name but the monies would be there for your child/children.
  • No minimum/maximum investment period
  • Can be written under trust or jointly owned.

The value of your investment and any income from it is not guaranteed and can go down as well as up. You may not get back the original amount you invested.

Because of changes in US legislation, if you are or become resident in the US, you won’t be able to hold any shares in our ISAs. We’ll write to you to advise you of your options and that we’ll have to sell your shares.

ISAs

Stocks and shares ISAs are tax-efficient, which is a term used to describe investments that offer tax benefits or tax relief. Any increase in value of the investments in your stocks and shares ISA is free of any personal liability to Capital Gains Tax and no Income Tax is payable on interest earned on investments or dividends received on shares held in an ISA.

Tax rules can change. You can find out more information on tax rules on the government website.

OEICs

Personal Savings Allowance

On 6 April 2016, the Government introduced a Personal Savings Allowance on the interest earned on savings and on interest paying bank accounts. This means:

  • The first £1,000 of savings interest that basic rate taxpayers earn is free from Income Tax
  • The Personal Savings Allowance is reduced for higher rate taxpayers, meaning the first £500 of savings interest is free from Income Tax
  • There is no Personal Savings Allowance for additional rate taxpayers
  • You’ll normally need to pay tax on any savings interest you receive above your Personal Savings Allowance.

Interest Distributions

From 6 April 2017, the Government introduced further changes impacting UK OEIC funds; removing the requirement for fund managers to deduct basic rate Income Tax from interest distributions. Consequently, from April 2017, all interest distributions from your OEIC investments with us will be paid without deduction of Income Tax (otherwise referred to as being paid ‘gross’). The gross payment is savings income for the purposes of the Personal Savings Allowance, and should be included in your self-assessment tax return.

Dividend Distributions

Dividend distributions are classed as taxable income, so you should declare the total amount received or earned to HM Revenue and Customs (HMRC). Depending on your personal circumstances you may have a liability to pay tax on some or all of the dividends received or earned.

For details of the current dividend allowance, please visit www.gov.uk/tax-on-dividends.

Capital Gains

Unless you have invested via an Individual Savings Account (ISA), you may have to pay Capital Gains Tax on any gain that you make when you cash in your shares or switch between funds. This might be payable if you sell your investment and make a profit (a gain). If this profit, together with any other gains you have made in that tax year, comes to more than the personal annual exemption limit for that tax year you will have to pay Capital Gains Tax.

If you cash in your OEIC, we don’t deduct Capital Gains Tax before we pay it out.

The government set out the Capital Gains Tax allowance each year.

Inheritance Tax

When you die, the value of your investment will form part of your estate for inheritance tax purposes. The money will remain invested until we receive instructions from your legal representatives.

Your representatives must declare your OEIC investments, along with other assets of your estate, to HM Revenue & Customs.

Tax rules can change. You can find out more information on tax rules on the government website.

There are a number of factors that will affect how much risk you are willing to take, including how long you plan to invest, your age and health, your income level, your investment goals, the source of your funds, and how much of your total assets the investment represents.

Understanding Risk

Over the longer term, investments could offer better returns than cash savings, but in trying to achieve higher returns this does mean more risk. When deciding how to invest your money, it's really important that you understand the risk levels involved in different investments, and work out how much risk you're comfortable with. It's also important to consider how long you want to hold your investment.

When you’re investing, you'll need to think about both your attitude to risk and your ability to absorb losses. Some people would be very unsettled by the prospect of the value of their investments falling, while others would be happy to take the risk of ups and downs in the stock market.

If you want to more information, call us on 0345 300 2244 (opening hours and peak call times).

In order to improve the comparability between different funds from all over the European Union, the SRRI is a standard scale for funds to show how volatile they have been over the past 5 years.

The higher the rank the greater the potential reward but the greater the risk of losing money. It is based on past data and therefore may change over time and may not be a reliable indication of the future risk profile of the Fund.

  • The higher the number, the greater the volatility of the fund
  • Although the SRRI gives an indication of what level of volatility a fund has experienced in the past, it’s important to consider other factors that may offset fund performance such as what the fund invests in and the level of diversity
  • The SRRI does not indicate expected growth or losses, short term fluctuations can be in either direction and may cancel each other out over time.

The scores above are calculated using annualised volatility % and these can be found below:

SRRI Annualised volatility*
1
2
3
4
5
6
7
0–0.49%
0.5–1.99%
2–4.99%
5–9.99%
10–14.99%
15–24.99%
25% +

*This is based on weekly or monthly data from the past 5 years. The data is converted into a yearly equivalent percentage rate called the annualised volatility rate.

One way in which you can help reduce the impact of any market volatility is to spread your investments across different asset classes and regions. For more information about investing across different asset classes take a look at this guide.

To learn more around the purpose of a KIID please click here.

If you are an invested in Scottish Widows funds and want to access the latest KIIDs, SIIDs, prospectuses and forms relevant to your investment please click here.

If you are an invested in Halifax funds and want to access the latest KIIDs, SIIDs, prospectuses and forms relevant to your investment please click here.

We have fund prices and fund factsheets that shows the fund performance for most of our pension funds.

The fund factsheets help you compare funds.

We have created a step by step guide that should help you read and understand the fund factsheets.

We know funds and investments can be difficult to understand. Please call us on 0345 300 2244 (opening hours and peak call times) If you need us to help you find the correct factsheet.

Fund name and approach

  • The Investment approach is usually found in the top left hand corner (Scottish Widows only). If you can’t find this, call us on 0345 300 2244 (opening hours and peak call times)
  • The name of the fund is shown next, which also shows the share class and if it’s an accumulation or income fund
  • You will also find the date the factsheet was last updated.

Asset Allocation

  • This tells you what the fund invests in and the level of diversification.

Fund Aim

  • Whether the fund is focused on income, growth or a combination of both
  • What sorts of asset types the fund invests in (e.g. automotive, pharmaceutical)
  • What countries and regions the fund invests in (e.g. China, Asia).

Basic Fund Information

  • The fund information shows you when the fund launched and who the fund manager is
  • The fund manager is a key piece of information and can easily be researched through search engines to understand their track record compared to other fund managers
  • This also shows you how long the fund has been managed by that person
  • This can be useful when reviewing fund performance
  • The ISIN number lets you search for the fund online; on external sites you can find more information on the fund and compare a number of funds side by side. Click here for Morningstar website that allows you to do that.

Top ten holdings

  • The top 10 companies or funds the fund is invested and what percentage is held in each company/fund
  • The companies a fund manager invests in will depend on what the aims of the fund are.

Fund Rating Information

  • Financial Express (FE) – Crown Fund Ratings range from one to five
  • More crowns, the better a fund has performed in terms of stock picking, consistency and risk control
  • Gives an indication of how well the fund has performed compared with similar funds/peer group. The FE crown rating is regularly reviewed and may change.

Performance

  • There are two pieces of performance information: Discrete and Cumulative
  • Discrete shows you a snapshot of the performance in each calendar year whereas cumulative adds up performance over time to show overall growth or loss over one month, 3 months, 1 year, 3 years and 5 year periods
  • Discrete performance gives you an insight into the consistency of performance which may be hidden in the cumulative performance story
  • It is very important not to look at performance in isolation as it doesn’t indicate what could happen in the future
  • The value of investments can go down as well as up.

Quarterly Fund Manager Review

  • This is like a “school report” for the fund and reflects on what has happened over the last quarter but isn’t an indicator of future performance
  • This gives you an overview of what has happened in the markets and may explain downturns in performance
  • You can get a sense from this section on if there are fund specific performance issues or if it’s due to the wider market conditions.

Your annual statement will tell you what funds you are currently invested in.

Before you review your investments or go ahead and switch funds make sure you have read:

If you want to switch funds, please call us on 0345 300 2244 (opening hours and peak call times).

It’s currently free to move, or switch between funds.

Remember that before making any changes to your investments, you should seek financial advice. If you don’t have a financial adviser, we can help you find one in your area.

Saving for your future doesn’t necessarily mean you need to fork out more money each month. Perhaps your mortgage payments have gone down or you’ve saved money on your utility bills. This could then be used to save more towards your investments without trying to make cuts elsewhere.

It’s good practice to review your monthly expenditure and shop around for deals. You may be able to save some money by switching energy company or insurance provider. £20 per month adds up to an extra £240 per year. Small payments like that over a number of years can make a difference to your savings.

You can choose to make lump sum or monthly payments as long as it doesn’t exceed the £20,000 ISA allowance (2018/2019 tax year). We can also help you if you want to pay regular or lump sum payments into your OEIC. Give us a call on 0345 300 2244 (opening hours and peak call times).

There is no minimum or maximum investment period and you can access your investment at any time - just call us on 0345 300 2244 and we’ll talk you through it (opening hours and peak call times).

If your withdrawals are greater than any investment growth and the payments you make, the value of your investment will decrease over time. Please note that although you can access your money at any time, investments in our funds are designed for the medium to long term (at least 5 to 10 years).

If you’d like to cash in your ISA, please contact us on 0345 300 2244. By cashing in, you will lose the tax benefits of your ISA with us.

If you’d like to cash in your OEIC, please call us first on 0345 300 2244 (opening hours and peak call times) as a Capital Gains Tax liability may arise if you do this.

You may have ISAs with other companies. One ISA saves you the hassle and paperwork of managing many different accounts. You have one central place to see how much you’re saving. It could also save you money on charges.

There are a number of things to consider before you transfer including comparing the charges and funds. Remember to ask your existing provider if they apply an exit charge for transferring out.

If you want to get more information on combining your ISAs, call us on 0345 300 2244 (opening hours and peak call times). This service is free, but we can’t offer you financial advice or recommendations.

If you’d like to transfer your ISA to another provider, contact the provider you choose. In most cases the provider will organise the transfer for you. By transferring, instead of cashing-in your ISA it keeps your investment within a tax efficient product.

An OEIC cannot be transferred to another provider. However, you can cash in your investment, but please call us first on 0345 300 2244 (opening hours and peak call times) as a Capital Gains Tax liability may arise if you do this.

Choosing the right investment fund is an important decision you need to make and these choices can influence the performance of your product and ultimately how much you have.

Your annual statement will tell you where you are currently invested.

Before you review your investments or do a fund switch, you should look at the following information:

Remember that before making any changes to your investments, you should seek financial advice. If you don’t have a financial adviser, we can help you find one in your area.

It’s important to let us know if anything changes, like your address, or your name. This makes sure our records are always up to date so you don’t miss out on receiving any important information.

To change your address, call us on 0345 300 2244 (opening hours and peak call times). Or if you’re registered for our online services you can update your address whenever it suits you.

If you’ve changed your name call us on 0345 300 2244 (opening hours and peak call times) and we can let you know which official documents you’ll need to send to us and we will arrange for a form to be sent out to you.

ISA & OEICs

The value of your investment would form part of your estate for inheritance tax purposes.

What happens to my OEIC if I die?

  • If your OEIC is held in joint names, it will continue to be held by the surviving holder(s)
  • We will provide information about the value of your plan to your personal representatives if and when they ask us
  • When your personal representatives have proved their legal entitlement to the investment, they may instruct us to cash in your OEIC or transfer it into another name. Until the shares are sold, they will be affected by daily price movements as normal.
  • The value of your OEIC is treated as part of your estate, so your personal representatives may need to declare it for inheritance tax purposes
  • Transfers of holdings on death can only be made to UK residents.

ISA only

If you die before cashing in your ISA, your investment will become a ‘continuing account of a deceased investor’. This means it can retain its tax efficient status for up to three years.

No more money can be paid into this ISA, but any income or growth will not be subject to Income Tax or Capital Gains Tax. It will remain a Continuing Account until the earliest of:

  • the date the administration of the estate is complete
  • the date the Continuing Account is closed
  • three years have passed from the date of death.

After that, all subsequent income or gains will become taxable to the estate, from the next working day. Your spouse or civil partner will be entitled to an additional ISA allowance equal to greater of the value of your ISA on the date of your death, or the value of it when it’s no longer a continuing account. This entitlement will be in addition to their annual ISA allowance and is called an Additional Permitted Subscription. When your personal representatives have proved their legal entitlement to the investment, they may cash in the ISA or have the shares transferred into another name.

How Scottish Widows advisers can help you

We have our own team of experienced financial advisers who can work directly with you. They can only make recommendations from Scottish Widows, but they are the experts in choosing the best options for you from us. They will first find out about you. Then they will have a careful look at your policies and plans and review your choices. They can give you a tailored recommendation for what you should do next.

For advice from a Scottish Widows Financial Adviser, call 0345 767 8910. One of our consultants will assess your requirements and set up an appointment with one of our advisers.

Key facts about Scottish Widows Advisers and Charges PDF.

Further help from Scottish Widows

If you are not looking for advice, but need further help from us, please call 0345 300 2244. Our opening hours are Monday to Friday 8am to 6pm and Saturdays 9am to 12.30pm.

Seek Financial Advice

A financial adviser can offer you services and products from other providers. Find a Financial Adviser in your area.

Money Advice Service

The Money Advice Service is independent and set up by the government to help people make the most of their money by giving free, impartial guidance. As well as information about pensions and retirement, they offer a wide range of other money topics.

Accumulation shares

These shares aim for growth so the income is automatically reinvested into your fund and this is reflected in the share price.

Annual Management Charge (AMC)

The AMC is part of the overall charges relating to your investment. There are other expenses which, together with the AMC, make up the Ongoing Charges for your investment. You may be able to benefit from lower AMCs depending on the amount you invest in your funds. For more information, please refer to the Key Investor Information Document and the Supplementary Investor Information Document for your fund.

Capital Gains Tax

A tax which may be applicable when you sell something that’s increased in value.

Conversion in/out

Any change from one share class to another share class within the same fund of your investment. When a conversion takes place, the number of shares can change as different share types usually have different share prices. There is a change in the number of shares you hold, but the conversion itself won’t affect the value of your investment and it won’t be treated as a sale for Capital Gains Tax purposes.

Designated account

A designated account is held by you on behalf of another person (e.g. your child/children) or for a specific future purpose. A designated account is only available to an OEIC holder, not through an ISA.

Distribution received

Any income from your shares which is paid to you either by cheque or directly into your bank account.

Distribution reinvested

Any income from your shares which is reinvested back into the fund to buy extra shares.

Early withdrawal charge (EWC)

If your OEIC was taken out after 29th June 2009 and you made a withdrawal in the first five years (from the start of your investment):

  • prior to 24th September 2017, an EWC will have been deducted from the amount you requested or from your remaining investment, depending on how you chose to make a withdrawal
  • from 24th September 2017, the EWC was removed and will no longer apply to your OEIC.

Income shares

If you’re invested in these shares, you can choose to receive a quarterly income payment.

Initial/entry charge

An initial or entry charge may be taken out of your money before it’s invested and shares are bought. The amount of the charge depends on the fund you invest in and covers the cost of setting up your investment. The charge is a percentage of your payment.

Sale

This means you have bought shares by paying a lump sum amount. We have sold the shares to you so the transaction is called a sale.

Share Class

A classification system which is used to differentiate between pricing structures and features of shares held in a fund.

Stock transfer in/out

Any transfer of shares between different customer accounts.

Switch in/out

Any change of holding from one fund to another.

Transfer in/out

Any transfers from or to other ISA managers.

Unit Adjustment

Your investment has received an increase in the number of shares you hold to reflect a correction we’ve made to your Account records.

Withdrawal/Regular withdrawal

Any shares you have sold. Each entry will show the amount sold, price applied and number of shares sold.