Barclay's defined returns investment ISA

Daneel

http://www.personal.barclays.co.uk/BRC1/jsp/brccontrol?task=homefreegroup&value=16026&target=_self&site=pfs

Any views on this account? My parents are disappointed with returns on the their savings accounts and want to make the most of their ISA allowance but don't want much risk associated with it.

If I am reading it correctly, this account provides ~8.8% return annually if the FTSE is higher in five year's time than it is at the point of investment and the invested amount back if it isn't. The only chance of not getting at least the amount invested back is if Barclays goes under or if the cash is withdrawn before the five years are up.

Are there any accounts offering better returns than this for the same level of risk?

Porcupine

As structured plans go it's not too bad. I think your calculations are wrong, though. I make it 6.96% AER over the 5 year term (don't forget compounding). It's delivered as capital gains which is good.

There's a bit more risk than you'd think, due to the sampling effect. If the FTSE suddenly shoots up on the day the starting price is sampled, then it becomes harder to achieve the increase. Similarly, if it dips on the final day you've lost all your gain (and therefore you've lost out by the sum of inflation over the 5 year term). While the dice are loaded in your favour, effectively you have only one roll of them.

Also worth checking, which I can't see from a quick glance of the factsheet, is what the plan is investing in and who provides the insurance. It's most likely to be Barclays, but check. In the last few years some structured plan managers are good at trumpeting the name of the share administrator but failed to mention the provider of the assets (eg AIG, Citi, Lehman Bros). Where are the assets held? Many plans have them offshore which means less protection for you.

Structured products have rightly come in for criticism in the wake of the credit crunch due to almost nonexistent regulation, so do your research as to the potential pitfalls.

dunstonh

Any views on this account?

First of all, its not an account. Its an investment.

Are there any accounts offering better returns than this for the same level of risk?

For the level of risk there could be better alternatives. They are not risk free. Two of the big players in this field are close to launching their new tranche and they typically beat Barclays. I would be inclined to wait for those first and then decide.

Daneel

Thanks for the replies.

I double checked the calculation, it's 8.78% compound over five years, giving 40% overall. E.g. invest £5,000, get £7,000 back:

5,000
5,439
5,917
6,436
7,001

Have I missed something? As my parents would be doing this as an ISA, isn't the tax status (income vs capital gains) irrelevant?

There seems to be a deadline for this deal, apply by 2nd June, so I don't have long to decide.

I couldn't spot what is being invested in, but it has to be FTSE linked somehow. The underlying assets are backed by Barclays, at the bottom of the page I linked:

"Please note that this product is protected by the credit worthiness of Barclays Bank PLC, the issuer of the underlying assets, which is rated as 'AA-' by Standard & Poor’s and 'AA3' by Moody's"

which is why I mentioned in the OP that if Barclays falls over the investment would likely go with it. My assessment of that is highly unlikely.


dunstonh: Can you tell me who the two big players you refer to are please?


Thanks again for the help guys.

dazeruk

Daneel wrote: »

I double checked the calculation, it's 8.78% compound over five years, giving 40% overall. E.g. invest £5,000, get £7,000 back:

5,000
5,439
5,917
6,436
7,001

Nothing to add about the product but that's only 4 years!!!

Daneel

dazeruk wrote: »

Nothing to add about the product but that's only 4 years!!!

That would have been what I was missing. See what happens when I try to use Excel while half asleep?

Thanks!

Porcupine: you were spot on, it's 6.96%

I swear I saw a different defined benefit investment, that was 7% per annum and wasn't stock market linked (I think it was bonds). It was provided by a high street bank but backed by Credit Suisse, let me see if I can find it.

dunstonh

40% overall over a period of 5 years is the equivalent of 6.96% AER according to my calculations and that matches porcupine. There are 8% p.a. versions out there.

I couldn't spot what is being invested in, but it has to be FTSE linked somehow.

Its not invested in the FTSE. Its a structured product where the issuer invests it in a variety of ways but the rate of return is governed by the FTSE100.

dunstonh: Can you tell me who the two big players you refer to are please?

NDFA and Premier tend to come out with the best terms. Investec have had a few good ones in recent times as well. Barclays tends to be the best version available from the all the banks.

Daneel

Hrm, this looks interesting:

http://www.lloydstsb.com/capital_protected_fund_isa.asp

Except for the fact that I can't see where it tells you the length of the term anywhere!

opinions4u

Daneel wrote: »

Hrm, this looks interesting:

http://www.lloydstsb.com/capital_protected_fund_isa.asp

Except for the fact that I can't see where it tells you the length of the term anywhere!

Look for the big green heading that says "100% protection when held for six years..."

jem16

Daneel wrote: »

Hrm, this looks interesting:

http://www.lloydstsb.com/capital_protected_fund_isa.asp

Except for the fact that I can't see where it tells you the length of the term anywhere!

100% protection when held for six years...
You can invest anything from £3,000 to your full ISA allowance of £7,200. And if you keep your money locked away until the end of term in the Capital Protected Fund ISA, we’ll protect 100% of your capital whatever happens to the stock market, so you won’t lose a penny of your original investment.

dunstonh

No, that SW one isnt very good and its 6 years.