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Guaranteed Capital Bond
Elliebelle_2
Posts: 6 Forumite
I am looking to invest some money (up to £100,000) and have been sent an illustration by Liverpool victoria for their Guaranteed capital bond, however the illustration was that after 11 years £10,000 could have grown to £13,750, surely it would have got the same amount of interest in a savings account?
Any advice appreciated.
Any advice appreciated.
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Comments
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I make that around 2.94% pa.Stompa0
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If that's corerect you could have got a lot more in a savings account! Even at 4% net per year you'd be looking at £14802.44, and you can get very close to that even as a higher rate tax payer. As a lower rate tax payer, you'd be looking at a lot more stillElliebelle wrote: »I am looking to invest some money (up to £100,000) and have been sent an illustration by Liverpool victoria for their Guaranteed capital bond, however the illustration was that after 11 years £10,000 could have grown to £13,750, surely it would have got the same amount of interest in a savings account?
Any advice appreciated.
I'm assuming that this is an example of what your capital could become rather than what it will become? Are these the bonds that are linked to the stockmarket, but with lower returns compared to normal investing? Or am I thinking of a different product?I am a Chartered Financial Planner
Anything I say on the forum is for discussion purposes only and should not be construed as personal financial advice. It is vitally important to do your own research before acting on information gathered from any users on this forum.0 -
There are far better examples available than this.
Illustrations use three rates which on bonds are 4% minus charges, 6% minus charges and 8% minus charges. So in reality, if there is a 1% charge on the fund you are more or less looking at 3,5 & 7% not 4,6 & 8%. Personally, I find illustrations under estimate with a half decent spread but its better to be that way round than the other (which used to be the case in the 80s and early 90s).
An investment into funds that have never failed to produce 10% a year would still have to use the 4,6 & 8% minus charge.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
Thanks for that. the illustration does say it is not based on an actual case, but is a demonstration of how the bond could work. It is a stockmarket related investment and states "there is no certainty that you will make a profit" which is the same for a lot of products I would imagine.0
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Why are you considering the investment bond tax wrapper?
The amount of £100k certainly is investment bond territory but do you need the tax advantages of the investment bond or would unit trusts and Stocks and share ISAs be the better option? (we dont know you affairs so we cannot judge)
Investment bonds can be the best product for tax reasons but they can also be the worst depending on your circumstances. With most UK tax wrappers now able to invest in the same areas, that just leaves you with the choice of tax wrapper and charges to consider.
LV dont come out highly on the research (didnt make top 15 on the last bond research I did). Its a strange recommendation if it came from an IFA. If it came from a tied rep of LV then you can understand it as its all they have.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
Thanks dunstonh, I appreciate you taking the time to reply. I have recently inherited a property worth approx £100K which I may sell, but I don't know what the best way to invest the money would be. I have no debts but a mortgage (£150,000+) and 3 children, so in all likelihood will need to be able to get my hands on money for university fees over the next 5-15 years.
I suppose I want to use the money wisely.
I am not a taxpayer as I do not earn enough to pay tax (approx £3,000 per year)
thanks again0 -
Investment bond is unlikely to be the best option for you. As a non taxpayer, unit trusts/oeics/sicavs will be the better option.
The investment bond pays the equivalent of basic rate tax at source and some capital gains tax within the fund. This gives you no personal liability for tax but that is because it is tax paid. Unit trusts would be more tax efficient for you based on what you have said so far.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
cheers, will look into what you have suggested0
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