Principality Building Society - 2 Year bond @ 4 Percent, What do you think?

loempia

Principality Building Society - 2 Year bond @ 4 Percent, What do you think?

Is this a good deal for the over 50's please, in todays marketplace?

Thank You for your help.

Robert_Sterling_3

Yes I think it is about the going rate.

umami

Don't ring them, very busy.
Dowload form and sent it off as their phone line will tell you.

asbokid

Savers today are forced to play a new game.. To ensure 100% FSCS cover of their deposits, they should choose a bank or society that will survive the term of their investment both intact and independent.

We have watched a number of smaller societies fall prey to the Nationwide over recent months. The deposits made at each of those smaller societies remain individually protected up to £50k, for the time being, under separate FSA licences held by each of the former societies.

As the rules work today, if you had £50k banked in Society 'A' and another £50k in Society 'B', and if those two societies were taken over by Society 'C' (which also has £50k of your money), then under the current (temporary) FSCS arrangement, you would receive full compensation of £150k in the event that Society 'C' collapsed. However, the rules of the FSCS scheme are currently under review and that arrangement may cease to exist before your investments have matured.

The likelihood of a building society takeover/merger is an important consideration for depositors in these uncertain times.

Ideally, you should avoid saving with a society which may be taken over by another society, and where the combined value of your deposits with those two societies exceeds £50k - the current ceiling under the FSCS compensation scheme.

Remember, the Staffs/Portman were gobbled up a while back and then we lost the Derbyshire and then Cheshire. Those latter two were absorbed in the same week alone!

Of course, today's big news is that the hapless Dunfermline has been swallowed whole (minus the pips) by the nation's ever bigger Nationwide Building Society.

That is the situation we find ourselves in today, having invested in long-term bonds with all of those societies. Through no fault of our own, we now find ourselves with deposits of over £50k at the Nationwide.

As for the Principality, there are warning signs that it too could suffer the same fate at the Derbyshire, Cheshire, Dunfermline, et al.

The directors of the Principality have also been indulging in speculative and risky casino-style commercial lending. And Wales, where the bulk of that lending has taken place, is a post-industrial wasteland. It will probably be one of the last regions of the United Kingdom to emerge from the Depression.

Fitch recently slashed its rating for the Principality on those grounds. Shortly before Christmas, the press was alluding to the possibility of the Principality being forced to merge with a stronger society.

Of course, if your total savings are well under £50k, and therefore fully covered by the FSCS scheme, then depositing at the Principality is probably a shrewd investment.

Take care, whatever you choose to do!

cheers,
asbokid

[Deleted User]

what utter rubbish re the principality and I am referring to the above post by asbokid

I have been investing for years now and that includes keeping my dh`s sipp above water when others are sinking. The principality is as sound as a pound. Where I live in s Wales is glorious and there are lots of very wealthy people around. I put principality pibs into the sipp holdings and am making a very fine yield of over 9%, tax free

http://www.collins-stewart.com/Downloads/FixedInterest/Leading%20Prefs%20&%20PIBS%2025-03-09.pdf

and by the way we do have the proposed severn barrage to look forward too. That will really open up s Wales

asbokid

i am not sure what you find to be "utter rubbish" ?!

Is there a problem with my interpretation of the FSCS scheme with respect to merged building societies?

the principality HAS sunk a disproportionate slice of savers' deposits in risky commercial lending.

fitch, the credit ratings agency, HAS downgraded its rating of the society because of that. This excerpt below is from the Daily Mail website....

"Ratings agency Fitch changed the society's outlook from 'stable' to 'negative' on November 24 [2008] due to concerns over its commercial lending books."

As for wales, and particularly south wales, it IS a post-industrial wasteland. Not the best place to provide commercial lending. The NEET rate in the Valleys is one of the highest in the country and parts of south wales lay claim to the highest number of social security claimants in the whole of the United Kingdom. Nearly half of Merthyr Tydfil, for example, is 'on the sick'.. What do you call that, other than a post-industrial wasteland?

This is a matter of letting nationalistic pride cloud your investment logic.

i daresay in the weimar republic, misplaced nationalism played its part in plundering the saver. No doubt german savers felt compelled by their own patriotic pride to sink their cash into the collapsing deutschmark..

my point, which seems to be have been missed, is that it is not sensible to buy a term product from any society, if you believe:

a) the society may no longer be independent by the end of the term
b) the society may be taken over by another society with which you also have savings.
c) the combined total of your savings with those two societies exceeds £50k, the ceiling of the FSCS scheme.

asbokid

This from an article in the Financial Times, Feb 4, 2009, titled "'Supermutual' seeks further deals":

A merged Co-operative Financial Services and Britannia Building Society will seek further takeover deals, as the new "supermutual" continues its mission to consolidate the mutually owned banking sector.

"Assuming this deal goes through, we would welcome conversations with any building society in the UK that has a similar commitment to its customers," Neville Richardson, Britannia's chief executive and the CEO-designate of the new group, said in an interview with the Financial Times.

If the deal is completed, 54 building societies in the UK - with £380bn in assets - will remain. While the combined Co-op/Britannia will consider deals in all parts of the UK, acquisitions in Scotland and Wales would be particularly attractive, given the group's limited presence in both regions.

Scotland is home to three societies - Scottish, Dunfermline and Century. Wales has another three - Principality, Swansea and Monmouthshire.

This, also from the FT, "Top rates to entice savers can be warning sign" (Dec 6 2008):

Principality, another top payer, is among a number of building societies that have had their financial strength ratings downgraded by Moody's, the credit agency. But, the mutual lending sector has a long tradition of rescuing any society in difficulties.

So both Fitch and Moody's have now downgraded the Principality..

baby_boomer

Dunfermline BS - Scotlands only large BS - doesn't issue PIBs.

If it did they could easily be worth £0 and be paying £0 pa today .

Principality's higher than average PIBs yield reflects the higher risks that the ratings' agencies have identified.

But that wouldn't stop me saving with the 4% two year bond.

sabretoothtigger

I dont think Wales had a property boom to collapse really. Like you say long term depressed prices due to the coal industry being run down, theres been some replacement by call centres and the failed LG project and other things but cant see an obvious risk.
Principality is fairly morose at least on the retail side, no flashy offers

Robert_Sterling_3

kittie wrote: »

The principality is as sound as a pound.

Is this deliberate or unintentional irony?

sabretoothtigger

:laugh:

To be fair our exchange rate has fallen but only back to what it was at other times, its not crashed yet or at least its done better recently


http://uk.reuters.com/article/ukPoundRpt/idUKLU62013120090330