Guide to Open-ended Investment Company funds
Open-ended Investment Company (OEIC) funds give you the opportunity to enjoy the power of big institutional investors by pooling your money together – usually for a number of years. OEIC stands for Open-Ended Investment Company, which is effectively an investment company or fund where shares are created or cancelled to match demand. An OEIC fund can be invested in directly or via a Stocks and Shares Individual Savings Account (ISA).
What does investing in an OEIC fund involve?
Once your money goes into the pooled fund, a fund manager will then invest this across a number of different assets, such as fixed interest, shares and property. They will make regular adjustments depending on the performance of the individual assets, market conditions and the fund's objectives to try to achieve capital growth and/or income. Although OEICs are considered a medium to long-term investment option – usually between five to 10 years – you could access your money if you needed to.
However, your returns will depend on how the assets perform and how long you hold the investment. The value can go down as well as up and so there is always the potential that you may not get back the amount you put in, especially if you take your money out too early.
Enjoy the power of big institutional investors by pooling your money together.
Tax treatment of OEIC funds
From 6 April 2016, new rules for the taxation of dividend income will abolish dividend tax credit and a new annual dividend tax allowance of £5,000 will be introduced. For OEICs where someone’s total dividend income is less than £5,000, no tax will be payable. The rates of tax on dividend income above this allowance will be:
• 7.5% on dividend income within the basic rate band
• 32.5% on dividend income within the higher rate band
• 38.1% on dividend income within the additional rate band
OEICs are just one type of investment available to you. Find out more in our articles below.
We are not recommending one option over another or providing advice. In addition, tax rules require careful consideration and may not reflect your individual circumstances. The above is based on our understanding of current taxation, legislation and HM Revenue & Customs practice, all of which is liable to change without notice. For more information please visit gov.uk.