General Investment Account
Unit Trust (UT)/OEIC (Open Ended Investment Company)
Main Benefits
OEICs/Unit Trusts are forms of collective investment, which allow individuals to participate in a large portfolio of assets by pooling their money together with other investors. This gives the individual access to a much wider spread of holdings than can normally be achieved with smaller sums of money, which in turn reduces the risk. OEICs and Unit Trusts are a flexible and relatively cheap way to invest in the stock market, they are run and regulated in a similar way and you can hold them within an ISA.
How a General Investment Account Works
The funds within a general investment account are known as Unit Trusts (UT) or Open-ended Investment Companies (OEICs).There are differences - an OEIC is set up as a company whereas a unit trust is a trust and you will usually find that unit trusts have two prices - the 'bid' price which is the lower price you receive when you sell, and the higher 'offer' price you pay to invest. The difference between the two prices is commonly known as the bid/offer spread. With an OEIC there is usually a single price to buy and sell shares, so it's easier to see the actual effect of charges.
The fund is divided into units or shares, which are valued on a daily basis and reflect the underlying value of the fund. This value will fluctuate on a daily basis with market conditions.
However, unit trusts are expected to become 'single-priced' eventually, with some already so. It is therefore important that you understand the way your investment charges are made.
Taxation
In terms of the tax position of General Investment Accounts any realised gain in excess of an annual capital gains tax allowance will be chargeable as a capital gain. Dividends arising from funds within the account will be received gross these will be assesable within your annual dividend allowance. Dividends received in excess of this allowance are liable to tax at your marginal dividend rate. Income distributed from corporate bond funds will pay gross interest. Where these payments fall within your personal savings allowance, no further tax will be due. Where interst is received in excess of this allowance you are laible to tax at your marginal rate.