What is a General Investment Account and How it Works

investing

A General Investment Account, which can also be called GIA, is an investment fund that gives the account holder the freedom to invest in a great variety of fields and areas outside of tax wrappers. Nowadays, anyone living in the UK and over the age of 18 can open a GIA and start investing in funds, shares, investment trusts, EFTs, bonds and so much more. In the last few years more and more people decided to prefer a GIA over a regular pension fund because it allows the holder to withdraw money at any time. On the contrary, all retirement funds currently available in the United Kingdom don’t allow to access the money until reaching of the retirement age, which is currently set at 55. With a GIA, you will also have the chance to transfer funds from another existing account. However, this particular type of account doesn’t provide any particular tax benefits for your investments, you will have to pay contributions according to your tax situation. A General Investment Account could be a good choice for holders who own an ISA and already reached up the annual allowance and also for people who haven’t reached their retirement age yet and want to have free access to their money. Usually, most people get stuck on the GIA vs ISA matter, without knowing which type of account is the best for their financial situation. Let’s go deeper into this matter so you can understand more about these two investment accounts.

Should you open a GIA?

As already mentioned, a General Investment Account could be a really good idea for those investors who already used up their ISA annual allowance and for those who want the freedom to access and withdraw their money at any time. Moreover, a GIA just like an ISA gives the holder can choose between a wide range of investments. Even though a GIA could seem like a very convenient account to open, you should never forget that all investments are always subject to the market’s swings, so there’s always the chance to get back less than what you invested.

GIA or ISA? Which one should you choose?

Nowadays, many new investors struggle to choose between an ISA and a GIA because they don’t know the differences between them. While they may seem like two very similar types of accounts, they are actually two completely different things. Let’s have a look on the main differences between these two really popular investment accounts available in the UK.

First of all, as already mentioned, a General Investment Account is a particular kind of investment fund which can be opened by any UK resident over the age of 18, that allows the holder to invest in a wide range of areas. A GIA comes with no restriction on the amount of money that can be deposited in a tax year and it gives the holder the freedom to withdraw at any time. With this kind of account, you will have to pay contributions according to your tax situation. On the contrary, an ISA is an Individual Savings Account, which has been designed both for savings and investments. Unlike a GIA, by opening and ISA the holder must comply with the annual ISA allowance, which is the maximum amount that can be deposited in a year. This value currently amounts to £20.000 per year. Also, all funds deposited on an ISA are completely tax free, so the holder won’t have to pay any contribution. Either way, always keep in mind that all investments, both made through GIAs and ISAs, come with a risk.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.