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A Guide to Lump Sum investments


Stocks and Shares

Shares are issued by companies who wish to raise money. The best known shares are bought and sold daily on international Stock Markets. There are several different types of share but the most common are simply called ordinary shares.

A shareholder will normally receive a dividend twice a year which is related to the profitability of the company. It is the board of directors who decide how much the dividend will be in any given year. Dividends can be raised, lowered or stopped altogether, but past experience has shown that over the medium to long-term they tend to rise, thereby giving investors some protection against inflation.

When a dividend is distributed to a client the tax voucher issued will show the ‘deemed gross dividend’. The client will only receive 90% of this amount but it is the deemed gross dividend that is assessed to determine whether any further income tax is due. The total tax paid will vary depending on income.

  • Basic rate tax payers - 10%.
  • Higher rate tax payers – 32.5%.
  • Additional rate tax payers – 42.5%.

In the short-term share prices may fluctuate in response to changes in opinion about the company itself or the general outlook for business and the economy as a whole. However, in the medium to long-term, past experience has shown the tendency for share values to rise i.e. capital growth. This helps protect the real value of the investor’s capital against inflation. Please note past performance is not a guide to future performance.

Selling shares may produce a capital gain for investors i.e. the value realised at the sale may be greater than the value at the time of purchase. A capital gain realised on the sale of shares is potentially liable to Capital Gains Tax if it exceeds the investor’s exemptions and reliefs.. Capital losses may be set against gains for tax purposes.

Investing in individual shares can be risky and picking the wrong company could mean losing some or all of the original investment. Also the brokerage fee paid when buying and selling needs to be taken into account when considering returns.

This risk can be spread by investing in Unit Trusts (covered in the next section) which typically cover a portfolio of shares, thereby reducing the impact if one particular share does not perform.


To learn about other investment options, return to the Introduction to investments section.

To learn about the following investments, if you aren't already familiar with them click on the relevant link:

However if you feel that you need some help from a financial advisor, then visit our section on obtaining financial advice, or our page on Laterlife selected services and associated advice.



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