Guaranteed Investment Account

savetilibleed

I have some leaflets in the post today from the Yorkshire Building Society about their Guaranteed Investment Account

It guarantees minimim growth of 7% at the end of the 5 year term and up to 50% growth based on potential growth of the FTSE 100 index.

Now I've always (in better times) been sceptical of these types of investments, preferring known risks. I know they say the money is guaranteed safe as long as you hold the investment for the 5 years. But 7% ain't much over 5 years!

Not sure I can think 5 years ahead. Life is too uncertain. But then I don't have a proper pension arrangement but an almost full cash ISA + other cash mainly now in fixed term bonds since the interest rate crashes.

What do you folks here think of these types of investments in general.

Thanks

withnell

That's 7% TOTAL RETURN over 5 years = 1.36% p.a.

unhealthyman

These guaranteed return accounts are always a bit of a trick to hide potential returns. If you are enticed by the potential returns from the FTSE but really can't take any risk then it might be an 'ok' investment, but largely, it's not worth it. The invisible small print is that, apart from that 7% TOTAL RETURN, you could get nothing (and if you invested in a riskier real investment you could get a far better return.) If you are pessimistic enough to think that there wouldn't be any return on a FTSE tracker over the 5 years, then you shouldn't be investing in this product.

It's not a totally terrible product - you could do reasonably if the FTSE does well. But you could do so much better with so many other options.

dunstonh

Cue the FAQ response....

Naff.

Mikeyorks

It's paltry when compared to the offer by Premier Asset Management - that closed 23/1. That offered 12.25% pa (CGT not IT - min investment £5k).

But it was a 'kick out' GEB. In that if the FTSE was at the same point or higher on the 1st anniversary - then the product matures + 12.25%. If below the start point .... the same test at the 2nd anniversary - product matures + 24.5% if FTSE same as, or better, than start point. And so on - for 6 years.

Earlier offers - this time last year - were at 16%pa and 14.5%pa. Earlier (long) thread referenced at post #9 here :-

http://forums.moneysavingexpert.com/showthread.html?t=1423003