Savings & Investing — Page 23

Compound interest means you earn interest not just on your original deposit but also on previously earned interest. Over time this creates exponential growth. The rule of 72: divide 72 by your annual interest rate to estimate how many years it takes to double your money (e.g. 4% rate = 18 years to double). Use the compound interest calculator to model different scenarios.

The pension annual allowance for 2026/27 is £60,000 (or 100% of your earnings if lower). Higher earners with adjusted income above £260,000 have a tapered allowance (minimum £10,000). Unused allowance from the past three years can be carried forward. Contributions above the allowance are subject to an annual allowance charge.

The full new State Pension for 2026/27 is £230.25/week (£11,973/year). You need 35 qualifying years of National Insurance contributions to receive the full amount (10 years for any State Pension). You can check your NI record and State Pension forecast at the HMRC/DWP "Check your State Pension" tool on gov.uk.

Yes — savings interest is taxable income. However, basic-rate taxpayers have a Personal Savings Allowance (PSA) of £1,000; higher-rate taxpayers get £500; additional-rate taxpayers get £0. Interest within an ISA is always tax-free. Starter-rate taxpayers (income below £17,570) may also benefit from the starting rate for savings of up to £5,000 at 0%.

Premium Bonds are a savings product from NS&I backed by the UK government. Instead of interest, your bonds are entered into a monthly prize draw with prizes from £25 to £1 million. The current prize rate is equivalent to roughly 4.4% (tax-free). They are best for higher-rate or additional-rate taxpayers who have used their ISA allowance and want tax-free returns.

Workplace pensions have the advantage of employer contributions (usually 3% minimum) and auto-enrolment, making them almost always the best starting point. A SIPP gives more investment flexibility and is useful for the self-employed, additional voluntary contributions, or consolidating old pensions. Many people use both. Articles in this category explain when to use each.

A Stocks & Shares ISA is the most tax-efficient way for UK investors to hold shares, funds and ETFs — all returns are free of UK income tax and CGT. Open one through a UK platform (e.g. Vanguard, Hargreaves Lansdown, iWeb). Start with low-cost index funds if you are new to investing. Never invest money you may need within 5 years.