Abbey's Guaranteed Growth plan... too late...

gaj86

Hello everyone. This is my first post, so I'm not sure what to expect!
But I'm 21 and about to go into my third year at University.
My post is connected with this thread - http://forums.moneysavingexpert.com/showthread.html?t=1022511 - but rather than being warned away from this investment, I'm posting to say that I already did so... and am now regretting it.
The thing is, I was given £3k for my 21st birthday, which my grandparents had invested for me for many years. Somehow they managed to get a 100% increase on what they invested...
Anyway, I wasn't THAT bothered about gaining a lot of money on interest, although obviously it would be nice. I wanted to put the money somewhere I couldn't touch it yet, as I would probably blow it on nothing. I'm planning on starting up a business in the next couple of years, and thought it would come in handy then.
I went to Abbey national and had a very frustrating chat to an "adviser". For some reason - and I kick myself for being so careless now - I decided to put £1500 in a "super ISA" and the other half in a guaranteed growth plan. I was told that one would earn 10% and be accessible after a year, while the other would earn around 6% and be accessible in 3.5 years. What nobody told me, at any point, was that I was in fact investing in shares. I only found this out when I received the "welcome to Abbey" etc literature through the post. By now, it is too late, because I didn't immediately return to the bank to cancel it. I received a half-yearly statement today, saying that the amount in my account is £1300, which is obviously much less than I put in. I understand that if I take the money out before "maturation" I may lose it, but then it also says "the value of investments can fall as well as rise and are not guaranteed"... as it is called a GUARANTEED growth plan, I am left very confused!! Can I lose money on this? What happens if Abbey go bankrupt? I have a very limited understanding of stocks and shares, and I am left feeling exploited, embarrassed and quite stupid for agreeing with so little knowledge. My father will kill me if I have managed to mess this up!!
So... sorry this was rambly but... can I lose money? Have I made a really bad decision? What's the worst case scenario now? Can anyone explain shares to me in very simple terms?? Thank you all for reading!
Gwyneth

dunstonh

Can I lose money on this?

In the short term yes. However, the guarantee kicks in at maturity so you have to hold it until you are back in surplus or maturity.

What happens if Abbey go bankrupt?

not going to happen.

What's the worst case scenario now?

You get your money back on maturity.

turbobob

You can lose money on this if you cash it in before maturity. If you hold it to maturity you will get at least your capital plus 5% back. You will lose money in real terms if the growth does not keep pace with inflation though (which seems like a distinct possibility).

turkey123123

Hi all,

I have one of these guaranteed growth plans and I have one more year left on a 5.5 year policy. So far I have made a couple of hundred pounds (much less than was quoted originally), should I grab my money and run or wait it out as I have made it this far?

Thanks for the advice

Omara

dunstonh

should I grab my money and run or wait it out as I have made it this far?

What is the penalty for early surrender?

much less than was quoted originally

Surely the minimum and maximum would have been quoted and you would expect to fall somewhere in that range, as is the case?

turkey123123

there is no penalty - i would just lose out on an extra years interest. They said that I would get a very high return but I haven't. Hope that answers your question.

dunstonh

Can you clarify the plan type as these are normally linked to the FTSE100 and have a penalty if you surrender early. They do not pay interest. Or is it a fixed term deposit?

AndyinLondon_2

turkey123123 wrote: »

there is no penalty - i would just lose out on an extra years interest. They said that I would get a very high return but I haven't. Hope that answers your question.

These plans are normally linked to the FTSE so nobody can say you will get a very high return, unless they have a crystal ball and can predict where the FTSE will be in five years' time. And if they can do that, they won't be working in a branch selling investments

turkey123123

I don't know the exact details I just know it's a guaranteed growth plan. All the documentation is at my parent's house. When I called and asked about cancelling they said it would take a few days to transfer the money into a Santander account or to allow 10 working days for a cheque. They didn't mention anything about a penalty.

dunstonh

turkey123123 wrote: »

I don't know the exact details I just know it's a guaranteed growth plan. All the documentation is at my parent's house. When I called and asked about cancelling they said it would take a few days to transfer the money into a Santander account or to allow 10 working days for a cheque. They didn't mention anything about a penalty.

They wont mention a penalty unless you ask the right person and the right questions. Structured products normally have something like a £150-£250 admin cost on early surrender and if the value of the underlying assets is lower than the investment strike point (date of commencement) then that loss is factored into the surrendered value. The "guarantee" only applies on maturity. Not on any date in between.