A simple, flexible way to invest in investment companies
- What is a wrapper scheme?
- How wrapper schemes work
- Wrapper schemes can save you money
- Finding a scheme
- Reinvesting your dividends
- Using your old shares to buy into a scheme
- Buying shares for other people
- Selling your shares
Wrapper schemes like ISAs and pension schemes are a way to buy shares without having to use a stockbroker directly. You can use them to buy shares in investment companies. They go under many different names such as ‘Share plans’, ‘Investment schemes’ and ‘Savings schemes’.
Wrapper schemes make it easy to use investment companies for things like investing for children or saving tax-efficiently.
- The company running the wrapper scheme (e.g. a management group) puts the money into your chosen investment.
- You can invest monthly or make a lump sum investment or a combination of both.
- There’s no penalty for how you choose to run your investment. You can increase or decrease your regular payments (subject to the rules of your scheme) and even stop investing and start again later. The shares are yours to hold or sell as you wish.
A wrapper scheme manager usually buys shares for all the monthly investors within a scheme as one bulk deal with a stockbroker. By pooling all the investors' money, the manager can usually negotiate a discount on the dealing costs. These cost savings are passed on to you, making wrapper schemes a cost effective way to invest regularly in the stock market.
Many investment companies have shares available through wrapper schemes, usually run by their management companies. Many of them let you build your investment up from a small amount, with monthly payments from £20 in some schemes and lump sums or occasional top-ups from £50.
Some wrapper schemes only offer shares in one investment company. Some offer several companies under the management of the scheme operator. Some offer a wider range of investment companies and investments.
You can hold more than one company's shares within a scheme and hold as many schemes as you want. For instance, if you’re investing for income, you could invest in several different investment companies paying dividends in different months to give you a regular income.
Once you’ve decided which scheme you want to invest in, the scheme managers will send you all the paperwork you need. You just fill in the forms and enclose a cheque or direct debit details and leave it to the scheme manager to do the rest.
Scheme providers usually charge extra to cover the costs of administering the scheme. You can find these costs in the literature. Always work out the total costs involved before you invest.
All schemes will send you a statement of your account at an agreed time. It will show you the number of shares you have bought and any charges you’ve paid.
To monitor your investment, share prices can be found on our website, in the major newspapers, on investment company or management group websites and other financial websites.
If you are a regular saver, your dividend payments are usually added to your next monthly contribution. If you are a lump sum investor or have stopped contributing, the dividend payments will be held until they reach a minimum sum suitable for investment. You may not earn interest on any money waiting to be invested.
If you already own shares in other companies but you’d prefer to have a managed portfolio, you might be able to swap your old shares for investment company shares. Some schemes will sell your old shares and use the proceeds to buy shares for you within their scheme. It’s a cost effective way to transfer your holdings, and a lot of the admin is done for you.
You can buy shares as a gift for other people within a wrapper scheme, either for an adult or a child. You should consider the tax implications before you do this – for both yourself and the recipient.
Children can’t hold shares in their own right but you can designate them as beneficiaries or set up a bare trust.
All schemes let you sell your shares whenever you want. You can sell some or all of them. Sale arrangements vary between schemes. Some need you to give written notice before you make any changes.
You should find out the sale arrangements for a scheme before you buy. You’ll find them in the brochure and the terms and conditions.