Natwest Guaranteed Combi Bond

KeepSmiling42

We have been offered a guaranteed combi bond by natwest but we're not sure whether it is a good investment.

The deal is that Natwest take a snapshot of the FTSE 100 now and again in 2015. If the value has risen by 50% then we will receive our deposit (which is guaranteed) plus 50% return in 2015. If it doesn't hit the 50% growth mark we will receive the return that the FTSE has grown by. If the FTSE grows more than 50% our return is capped at 50% and natwest receives the additional

Is this a good deal, given that we are willing to put a lump sum away for 5 or more years? Also if it is a good deal - Halifax has a similar offering. How do you choose?

thanks

dunstonh

No, its not a good deal. You can get better.

NewlyWedSavers

I've also been offered this bond but would like to know what's better, especially if it doesn't involve locking my money away for so long. Anyone have any suggestions?

sabretoothtigger

Sounds pretty awful. The majority of returns from a stock market in the long term are through dividends and they wont be giving you any

The 50% would be equal to 7% per year but since its not guaranteed its not such a good deal when you can get 4% right now with rock bottom rates and in 6 years much better I'm pretty sure

dunstonh

The 50% would be equal to 7% per year but since its not guaranteed its not such a good deal when you can get 4% right now with rock bottom rates and in 6 years much better I'm pretty sure

You can also get 8% p.a. on a GEB at the moment even if the FTSE drops 50% from its current level.

So, Natwest will give you 7% p.a. at the very best whereas 8% is available even if we have another major stockmarket crash from the current point.

Why do people keep going to banks for financial advice. They employ sales reps with expensive, low quality products. If you want advice then see an adviser. Not a sales rep.

NewlyWedSavers

Cheers! I don't trust the banks and i don't think i was offered good advice hence the reason why i'm on here.

I'm a complete novice at saving and want to find out more. I've an ISA and a regular savings account, what should i be doing next? Is a GEB something I should be looking into?

Any advice much appreciated

sabretoothtigger

Guaranteed Equity bond which is like the thread title

Baldur

NewlyWedSavers wrote: »

Is a GEB something I should be looking into?

From your previous post, you have already been offered a GEB (the Natwest Combi Bond):

I've also been offered this bond but would like to know what's better, especially if it doesn't involve locking my money away for so long.

The 8% GEB to which dunstonh refers (I believe that I have the right one dunstonh?) is a 5-year plan which depends on the FTSE being at least 50% of its value on the last day of the plan, in comparison with its value on the start date, to fully guarantee the return of your original investment.

NewlyWedSavers

As i said, i'm a complete novice at this so please bear with me.

You're right, i have been offered a GEB, i must have had a senior moment...

So is the general consensus that guaranteed bonds aren't complete rubbish - just the natwest option? And i would be better to look at the 8% GEB mentioned above?

dunstonh

So is the general consensus that guaranteed bonds aren't complete rubbish

Its a good idea to start with the basic assumption that they are rubbish but keep an open mind as every now and then a good one turns up. Not often but it does happen from time to time. The banks themselves tend to offer lower quality versions and you rarely find a bank offering one with decent terms.

GEBs are structured to be sold by low skilled sales reps to low knowledge consumers. They play on words like guarantee and no charges but in reality the guarantees are usually dependent on certain things and the charges are imlicit[hidden] e.g. linked to FTSE but you dont get dividends - Dividends can be 3-4% a year. So, is that the charge?

I dont know if the 8% one is the best one at the moment as I only got told about it a few days ago and havent done a full research on it but I know enough to know the terms are better than the bank version.

sabretoothtigger

The 8% one sounds decent to me but their budget doesnt include advertising it I guess

Even I cant believe the ftse would half from here and still be there in five or six years.

Though it has currently fallen below five years ago, its still at 80% of that level and this is quite exceptional already

Inflation would mean the ftse nominal price rises even if the money isnt worth as much