Is this bond worth it?

brownrob

Hi, first post but long time reader!

I just have been to my band while out buying tropical fish of all things but I had £2000 lying spare as the wages came in as well as some other things, so I transferred it to my ISA. The lady then suggested I should try what she calls the Premium brand bond, here it is here...
http://www.ulsterbank.co.uk/ni_01a.asp?id=PERSONAL/SAVINGS_INVESTMENTS/GUARANTEED_DEPOSIT_ACCOUNT

She says its a great time to invest in one of these right now as the stocks are very low at the minute and in 3.5 - 5 years time they should be all well up. I currently have £19k in my ISA and Im getting a paltry 2.8% on it with the recent cuts in interest. I thought I would get the advice of the good people here and see what they think about this product to see if its worth investing in. Im fairly tight with my money, live at home and dont spend a big deal, so I can live with the money being tied up for a while.

She also says that I can use the ISA money to fund it and not pay tax, and when the term has completed, all will be added back into the ISA account. She says the money is locked away but I would be able to take a loan against it when i decide to enter the housing market as a deposit. Im not too keen on switching banks and transferring isas to other banks as i live in a rural area and dont have much time to go into the banks!

In escennce, is this deal worth it, say says the bank is closing it on friday due to the cuts in interest

Thanks for making it this far! :T

grnglide

You would be moving from the "savings certainty" to the "equities lottery".

Over the timescales they are talking about no-one can forecast what the small basket of shares they have chosen will do.

While you are guaranteed you money back with a miniscule amount of interest they hold out the carrot of a return based on the change is shares prices in the last year of the bond.

I, personally, would be happier investing in a Stocks and Shares ISA (at least you always know you could lose the lot).

Difficult choice - your choice.

Stewster

brownrob wrote: »

Hi, first post but long time reader!

I just have been to my band while out buying tropical fish of all things but I had £2000 lying spare as the wages came in as well as some other things, so I transferred it to my ISA. The lady then suggested I should try what she calls the Premium brand bond, here it is here...
http://www.ulsterbank.co.uk/ni_01a.asp?id=PERSONAL/SAVINGS_INVESTMENTS/GUARANTEED_DEPOSIT_ACCOUNT

She says its a great time to invest in one of these right now as the stocks are very low at the minute and in 3.5 - 5 years time they should be all well up. I currently have £19k in my ISA and Im getting a paltry 2.8% on it with the recent cuts in interest. I thought I would get the advice of the good people here and see what they think about this product to see if its worth investing in. Im fairly tight with my money, live at home and dont spend a big deal, so I can live with the money being tied up for a while.

She also says that I can use the ISA money to fund it and not pay tax, and when the term has completed, all will be added back into the ISA account. She says the money is locked away but I would be able to take a loan against it when i decide to enter the housing market as a deposit. Im not too keen on switching banks and transferring isas to other banks as i live in a rural area and dont have much time to go into the banks!

In escennce, is this deal worth it, say says the bank is closing it on friday due to the cuts in interest

Thanks for making it this far! :T

I'm not sure about your bond but 2.8% on your ISA ? That's a disgrace. The best payers for transfers are Natwest and RBS and you can earn up to 6.6% although these include a bonus for a year of 1.5%. Take a look at these two articles which show how much more you could earn on your ISA if you can transfer to another provider. As you have 19k, you could earn 6.45% if you are able to switch it to Natwest for example.

http://www.moneysavingexpert.com/savings/cash-isa-transfers
http://www.moneysavingexpert.com/savings/best-cash-isa

Hope that helps somewhat.

brownrob

Thanks for the replies so far!

Last year I was on approx 4.5% but with the recent interest rate cuts she says its down to 2.8%
I bank with Ulster bank which is owned by Natwest/RBS so I dont know whats going on there! Im aware of transferring every year to a different provider but its a lot of hassle for me!

How long do people think the current recession will last for? Thats the million dollar question isnt it! :rotfl:

gozomark

How long do people think the current recession will last for?

another six months, based on the technical definition of a recession (2 consecutive quarters of negative GDP growth)

Paul_Herring

Looks like a guaranteed equity bond to me, walks and quacks like one. It's a rather crap one at that (not that there are too many good ones.)

You have a guarantee of getting at a minimum a 'real terms' loss on your initial investment (they guarantee between a 1.4 and 1.92% AER on your capital - only beneficial to you if RPI is lower than that each year over the term; unlikely to happen) and an absolute maximum of 10.53% AER, no matter how much more the markets improve (if they do) over the term.

In the mean time, they're collecting all the dividends on the underlying product (which will more than cover your 1.9% guarantee should the markets fall even further.)

And collecting any surplus if the markets rise. Bear in mind that the market has dropped over 40% in the past year - it need only recover 25% over the next 3 years of that for them to collect a profit.

Not a bad product; to sell that is, not to buy.

If you want exposure to equities, place a (small) portion of your savings directly in quities; if you don't, don't touch anything like this.