Santander Guaranteed Growth Plan - Good time to cash in?

[Deleted User]

I have a total of £180,000 invested in an Abbey Guaranteed Growth Plan. It's a 5.5 year plan with a guarantee of 25% return on investment and a chance of more (although I expect that small chance of more is gone now). It was taken out when my mother was ill in a nursing home and we just wanted it put away somewhere safe. She died shortly after and I inherited the money.

We're now two years into the plan and it's currently worth about £8,000 more than was paid in. A bonus for taking out this plan was the opportunity to invest a similar amount in a one year bond with an 8% return.

My dilema is whether to cash it in now or let it mature. On maturity I'm guaranteed 25%, but I would have to pay CGT so this would reduce it a little.

If I cash in early I've got the £8000 already earned in the past two years plus the 8% on the 1 year bond. It's not so bad given the current climate.

At this stage I need to consider if I can earn more than £17,000 in the next 3.5 years on £115,000? I wouldn't consider investments - just savings.

Can anyone do the sums and figure out the interest rates I'd need to beat this?

It would seem that if I'm going to cash this in early now is a good time to do it.

Seemore_2

At this stage I need to consider if I can earn more than £17,000 in the next 3.5 years on £115,000? I wouldn't consider investments - just savings.

Well if my o level maths are correct, to earn £17000 in 3.5 years on £115,000, your money would need to earn around 5% each year.

To be honest I dont think there are any savings accounts around at the moment which offer anywhere near 5% even for a full 3 year term.

[Deleted User]

Seemore wrote: »

Well if my o level maths are correct, to earn £17000 in 3.5 years on £115,000, your money would need to earn around 5% each year.

To be honest I dont think there are any savings accounts around at the moment which offer anywhere near 5% even for a full 3 year term.

Thanks for that - my o level maths wasn't up to the task! Shortly after my mum died I read lots of reports claiming that this was an awful investment. I felt quite bad about it as it was me that arranged it for my mum and my brother inherited half. But my feeling is that we got pretty lucky given the current climate.

In my brother's case, he was locked into a fixed term mortgage so couldn't pay it off until now. He's cashing in now and when you take into account the 8% bond he's not done at all badly out of this.

In the last two months the investment has increased by more than £4,000. I know it's extremely unlikely to continue doing so well, but assuming that it did it will have earned significantly more than the 25% that I'm guaranteed by the end of the 5.5 year period. Does anyone know what would happen in this case? Say for example it had earned 28% by year four. Presumably I wouldn't be allowed to cash it in at that point?

I'm just trying to get a clear idea of the circumstances under which it might be worth cashing in early. And whether you always do actually get the current cash in value if you cash in early.

I guess I need to check with Santander regarding the rules, but I just wondered what others thought?