November 13, 2019

Understanding the investment for better investment

Forex trading data

53% of British people say they have already invested their money or want to do so. For more than half of British taxpayers, investment takes up an important part of their economic life. In this article Tacotax helps you to understand investment and the projects in which to invest. 

The definition of investing in the economy

In economics, investment allows the acquisition of new means of production. This definition generally refers to investment by an enterprise. However, the notion of “investment” refers to the action of an individual’s investment. For example, the expression “to invest in your work” is to put your energy into some activity.    Investing your money is a form of investment.

A simple definition of the notion of investing in ISS 

 For students of economic and social sciences (ESC), investment is defined as the action of an economic operator to acquire durable goods that will enable it to produce other goods and services. Thus, a machine, a furnace or even a computer are durable goods that allow the production of other goods or other services. As you probably learned at SES, there are the hardware costs of intangible investment. Clearly, buying a building is a material investment, while buying software is an intangible investment. These investments are measured using indicators, in particular FCBF (gross fixed capital formation) which only measures tangible investment. 

Investing in financial investments

Investing money is the same as spending more money with the expectation of earning more. You can invest your money in financial investments such as stock market, REITs, within your business or for your retirement. 

Put your money in the financial market

Stock market investment attracts agents who are not afraid to take risks. In fact, a bad choice can make you lose all your shares and cause a drop in your level of life. When you enter this land, you must buy shares. Here are some practical tips to know when entering the financial market. 

Investing in a company: the Company Savings Plan (PEE)

The Company Savings Plan is a way to save within your company. Any employee whose seniority is more than 3 months can claim this collective savings plan. Company managers know another limit as they cannot claim it when the company exceeds 250 employees. There is also the Inter-company Savings Plan (PEI) which is a version of the PEE, but on a larger scale. Here, it is no longer the employee who saves, but an entire company saving on behalf of another company. 

You make free, optional voluntary payments. The amount must be at least 160 pounds per year. 

Therefore, you can pay:

  • a capital that comes from the incentive or participation
  • of voluntary payments with a ceiling on gross annual compensation set at 25%. 
  • the contribution: a ceiling set by the company, the payment of which cannot exceed 300% of the employee’s payment and 8% of the annual social security ceiling. 

As for the taxation of the plan, when you pay a contribution, you are exempt from income tax up to a limit of 3,241.92 pounds. When your payment comes from a share in profits, you are exempt from income tax up to a limit of 20,262 pounds. Your voluntary employee payments do not benefit from the deduction of taxable income. When you have income from your securities, you do not pay tax, but you are still subject to tax on social security contributions. 

As for the substance of the Company Savings Plan, the principle is to block the amounts saved over a period of 5 years. In certain exceptional circumstances, you can release the amounts saved in the company savings plan.

Investing for Retirement: The Retirement Savings Plan (PER)

You can also decide to prepare for your retirement by opting for the new retirement savings system, the PER. From 1 October 2019, the retirement savings plan covers the old retirement savings systems in three compartments:

  • an individual retirement savings plan ( Perp and Madelin ) which becomes the PERI
  • a retirement savings plan ( perco ) that becomes PERCOL
  • a retirement savings plan (categorised in Article 83) which becomes the PERCAT

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