Egg Guaranteed equity bond

This will be the one Lokolo refers too. I'm not giving a reccomendation though as I know little about them nor have compared others. DYOR as they say! ( Do Your Own Research)
http://www.ybs.co.uk/investment/gia/gia-tracked-growth.html#giaTop

Buzza2009 wrote: »

Could you tell me who else offer the better rates?

You do, by combining two products.

For the examples below I'll assume 4% of the original capital is paid in dividends from any FTSE investment part and that 4.96% a year over five years from Nationwide is used as a FSCS guaranteed cash part.

100% protection

Lets say that you want capital protection if the FTSE all-share index falls to 0% of its starting value. That is, that every company in the UK with shares issued becomes worthless, so 100% of the FTSE portion is worth nothing at all.

Place 74.5% of the money into the savings account. This is worth 949.02 at the end of the five years. The 4% dividends add ip to 51 over five years giving you 1000 value even if the FTSE is worth nothing. 74.5% in cash leaves 25.5% in the FTSE. Buy a FTSE100 tracker fund with that part.

End result is that your capital is 100% protected and you end up with 1000 plus whatever the 25.5% in the FTSE100 is worth. If the FTSE drops to nothing you lose nothing. If it stays the same you gain 26%. if it rises 30% you gain 33%. If it rises 50% you gain 38%, no 30% cap. If it doubles you gain 51%.

Protection for 80% FTSE drop

But lets say you don't think that the FTSE can possibly fall to less than 20% of its starting value, so you only need to protect against an 80% drop in the FTSE part.

Now 68.7% in the savings account will do the job and you can have 31.3% in the FTSE. If the FTSE drops to 20% of its start point you end up with what you started with. If it dropped to zero you'd lose 63 for every thousand in your total investment. If it drops 80% you break even. If it stays the same you gain 25%. If the FTSE rises by 30% you gain 34%, beating the Egg product. If it rises 50% you gain 41% instead of that 30% Egg cap. If it doubles you gain 56%.

Protection for 50% FTSE drop

If you don't think that the FTSE will fall by more than 50% then you can put 52.3% into the savings account and be protected against that drop. If the FTSE falls to nothing you lose 239 per 1000 invested. If it falls to 50% you lose nothing. If it stays the same you gain 24%. If it rises 30% you gain 38%. If it rises 50% you gain 48%. If it doubles you gain 72%.

Other properties
As well as matching the protection and beating the investment growth you get these properties:

1. Reduced counterparty risk. The Egg product puts all of your capital with Egg or perhaps an undisclosed other counterparty. This alternative uses an FSCS protected savings account and FSCS protected FTSE tracker so you don't lose money if the providers go bankrupt. Because two or more providers can be used you can get FSCS protection for a larger amount of investment than the 50,000 cap if it's all with Egg.

2. Instant access to the FTSE portion of the money.

3. Interest is assumed to be tax free. It isn't unless you don't pay tax. You can compensate for this by increasing the savings portion of the mixture. That will reduce the gain if the FTSE rises but keep the protection.

4. Choice of investment. You're not restricted to the FTSE100, though you will need to increase the savings portion if your investments don't on average pay 4% in dividend.

5. Transparency. There's no magic black box here, just easy to understand pieces: a savings account and a tracker fund.

Jamesd,

Your post should be saved, so we can refer to it when a new poster comes on asking about these awful products.