Birmingham Mid GEISA 50.40% AER 5 YEARS

ghostbusters

I came across this today
http://www.askbm.co.uk/savings/t/geisa/product.asp?id=207
and it looks like a great deal especially if like me that you think the markets will definitely be up in 5 years time.. Has anybody on here had a look and walked away? Curious to know why you walked . I understand its a 5 year lock in and 5% charge for early withdrawals.. but am I missing something .. Any advice would be most welcome. Thanks

opinions4u

The AER is either NIL or 8.50%.

You are effectively gambling all your interest for the next 5 years to get an annual return of 8.5% if the FTSE rises.

I think you'll almost certainly win, but it is not an absolute certainty.

I like it as a home for an ISA allowance.

gozomark

agree - interest rate over next 5 years likely to average 4-5% per annum, so you are playing double or quits with the interest foregone - the odds are loaded in your favour, so looks interesting, as long as you bear in mind you could lose.

Calchas

There is a three year option too, albeit at a slightly lower interest rate.

http://www.askbm.co.uk/savings/t/geisa/product.asp?id=208

I must admit, I am tempted.

Are the terms really as simple as they sound? Provided the Ftse 100 is at the same level or above, e.g. 4250 and 4250 and upwards, the interest is paid?

I am probably getting too cynical in my old age!

gozomark

its not the current FTSE level, but that averaged over a period mid Feb to mid March, but other than that is appears as simple as you say. One thing to bear in mind - I'm assuming its considered interest income for tax purposes (?) - if so, I presume that means 5 years interest receivable in one tax year

Calchas

I am slightly confused gozomark.

I thought that the whole purpose of Individual Savings Accounts was the absence of any concern about tax. What am I missing?

Regards

gozomark

there is a GEISA (ie guaranteed equity ISA - limited to £3,600), which the OP, and everyone except me was talking about, but there is also a GEB (ie guaranteed equity bond - can't see the max, but probably atleast £100,000), offering the same terms, except not in an ISA. My concern only applies to the GEB - sorry for the confusion :-)

jonnyb

usually Mr D is pretty negative about GEB's, but I would like his opinion on this, as it does sound tempting, and with interest rates in the floor for the next year or 2, I'm seriously considering it.

Calchas

Thanks for the clarification gozomark.

My gambling instincts only stretch to £3,600! With a few sleepless nights endured at that! :eek:

I think I will go for the three year GEISA. :cool:

Probably

Calchas

I would value dunstonh's opinion too.

How do we steer him onto this thread when he next logs on?

tradetime

Not sure I see it as the best way to use your ISA allowances, if I still had this years allowance, I'd rather stick the £3600 in the best fixed rate product I could find now, and then come April I suspect the ftse will likely either be in the midst of, or have completed the next leg down, then I'd stick it in an S&S ISA and buy a ftse tracker myself, this would at least give the flexibility to exit on a substantial bounce in the ftse at the end of the next leg down. Of course that does expose you to capital risk, but since it's a gamble anyway, I'd rather have the flexibility to time it myself, also does a ftse tracker not have a dividend yield to help cushion the risk? Currently EWU has a 10.5% yield.