A guide to safe investments in the UK

Safe investments in the UK include government-backed investments, such as those offered by National Savings and Investments. Bank investments may be made within an Individual Savings Account, which is a tax-free account offered by many financial institutions and it can include cash or shares.

UK government-backed investments

National Savings and Investments (NS&I) has the backing of HM Treasury. NS&I index-linked savings certificates are a tax-free investment linked to the retail price index (RPI), provided that the certificates are held for at least one year. The investment term is five years long and investment can be between £100 and £15,000 for each issue. An alternative investment is index-linked UK government bonds, which are known as index-linked gilts. These are normally traded by large institutional investors, but small savers may gain access to the benefits of this type of investment through exchange-traded funds (ETFs) that invest in these government securities.

Gold and silver

Gold can be bought as gold bars or coins, gold certificates, gold accounts or in the form of an exchange-traded fund (ETF) or similar instrument. Gold is favoured as an investment because it may keep its value when currency is falling. However, the gold price itself may be subject to fluctuation, owing to speculation. A gold investment should therefore, be approached with care and due consideration as any possible downward movements can occur in the gold price. Putting a fixed amount of money each month into gold may lessen the risk from short-term fluctuations in the price. Unlike gold, silver has many industrial uses and the price is therefore, partly linked to demand in the industrial marketplace. Silver is however, similar to gold in that, it is also seen as a relatively safe haven against currency fluctuation. The silver price is subject to fluctuation due to speculation and to the relatively small size of the silver market as compared to the market for gold. Silver investments may be made in the form of silver coins, bars, certificates, silver accounts or exchange-traded funds (ETFs). Investors wishing to diversify their investment to make it safer can find ETFs that cover a number of precious metals or a wider range of commodities.

Individual savings accounts

Investments such as those in ETFs are not tax-free. However, tax relief may be obtained by investing through an Individual savings account (ISA). This offers relief from income and capital gains tax for annual investments up to £10,680 for 20.11.12, which could be saved in a stocks and shares ISA, offered by a financial institution. Alternatively, up to £5,340 may be invested in a cash ISA and the rest of the annual amount contributed to a stocks and shares ISA.