Trusts guaranteed by government like savings accounts?

jonboy_2

I am thinking about investing in a gift trust with the Norwich Union, but I'm concerned in the present climate about the risk of losing the money in the event of it going under. Does anyone know whether there are any guarantees from the government regarding trust funds, similar to the ones for up to £35k for savings accounts?

In the same way that we are advised to spread the risk by having no more than £35k in savings at each bank, would I be better off having the money earmarked for the trust to be spread around different institutions?
Thanks for any replies.

dunstonh

but I'm concerned in the present climate about the risk of losing the money in the event of it going under.

You are concerned about one of the biggest and well capitalised insurance companies in Europe going under?

Does anyone know whether there are any guarantees from the government regarding trust funds, similar to the ones for up to £35k for savings accounts?

100% of first £2000 and 90% of the rest with no upper limit (assuming you are using the NU portfolio step down or level option.

would I be better off having the money earmarked for the trust to be spread around different institutions

Not really.

jonboy_2

Thanks dunstonh. Could I just clarify your point of 90% of the first £2k being guaranteed by the government and 100% of the rest.

If, for e.g, I invested £100k in the gift trust and in the (hopefully very unlikely!) event of the NU going under, I would only stand to lose £200?! Apologies if I have misunderstood your answer!

Regarding the NU being one of the biggest insurance companies in Europe, with the present climate allowing short-selling traders to bring previously regarded safe institutions to their knees, should we not rule out even the most unlikely scenarios?

dunstonh

Could I just clarify your point of 90% of the first £2k being guaranteed by the government and 100% of the rest.

The FSCS is not Govt funded.

If, for e.g, I invested £100k in the gift trust and in the (hopefully very unlikely!) event of the NU going under, I would only stand to lose £200?! Apologies if I have misunderstood your answer!

sorry, that was a typo. Its the other way round. I have written it out so many times in the last week that I was almost on auto pilot. Its 100% of first £2000 and 90% of the rest. So, on £100k, £9800 would be the amount lost. However, it wouldnt be that because NU portfolio bonds give you an allocation of around 107% on £100k. So, your value from day one would be £107,000. £2000 of that protected 100% and 94,500 being the 90%. Meaning you only stand to lose £3500.

The protection is based on the daily value not the amount you invest.

should we not rule out even the most unlikely scenarios?

If Norwich Union fail then we will have far worse things to worry about as to whether you will get your money back or not. UK insurers had to increase their solvency requirements after Equitable life. That has made them able to withstand problems like this much better than the banks. Plus, whilst they have some exposure to the areas involved, they are not as heavy into it as the banks are.

jonboy_2

Thanks again for your help in clarifying the matter