Isa bonds

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593jim
593jim Posts: 14 Forumite
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ISA Bonds do not appear I the best buy tables and I am wondering why not. I am looking at the Castle one year bond paying 2% but it states that it is classed as a stocks and shares bond.
They are part of the FSA are these bonds therefore covered by the £85000 compensation scheme?

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  • dunstonh
    dunstonh Posts: 116,376 Forumite
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    ISA Bonds do not appear I the best buy tables and I am wondering why not.

    Bond is a very misused term. There are many products that use the term bond. Some correctly. Some incorrectly. Some have 100% FSCS protection. Some have no FSCS protection at all with 100% loss potential.

    I suspect you are using the term "bond" to mean fixed term deposit.
    This Castle Trust product is not a fixed term deposit. It is a risk based 100% loss potential investment.
    They are part of the FSA are these bonds therefore covered by the £85000 compensation scheme?
    No they are not. The FSA does not exist (other than the food standards agency). The protection scheme is run by the FSCS and comes in three types. Insurance, Investment and Deposit. The £85k scheme is the deposits scheme. This Castle Trust investment does not fall under the deposits protection scheme.

    Typically, this type of investment does not get any FSCS protection. However, Castle Trust seem to think it does. It is possible they have put it into a packaged it into a retail investment product and that is why it gets FSCS protection. Or it could be that they are not protected by the FSCS and are mistaken. The latter happened with a lot of investments prior to the credit crunch with providers either giving the wrong type of FSCS protection or finding out there was no FSCS protection at all despite saying there was. The FSCS itself went through a learning curve with the credit crunch as it didnt know either.

    So, the reason this doesnt appear in the best buy tables is because it is not a deposit product. It is not a fixed term deposit.
    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.
  • jimjames
    jimjames Posts: 17,619 Forumite
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    593jim wrote: »
    ISA Bonds do not appear I the best buy tables and I am wondering why not. I am looking at the Castle one year bond paying 2% but it states that it is classed as a stocks and shares bond.
    They are part of the FSA are these bonds therefore covered by the £85000 compensation scheme?

    There is no such thing as an ISA Bond. There are cash ISAs and S&S ISAs. S&S ISAs can contain bonds as you have found but the ISA is just the wrapper not the product.

    It's not a cash savings product and you could lose all your money. Why would you buy such a product when you can get something with far better return and risk profile with normal funds?
    Remember the saying: if it looks too good to be true it almost certainly is.
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