5 year Gaurenteed Equity Bond...Britannia

Dom3663

Ok my 5 year bond matures on December 2, 2009. Opened December 2 2004.
It is guaranteed equity so my initial £1000 is safe whatever happens.

I have actually inherited the account so I do not know the specifics of it but it looks like its based on the FTSE 100. If the FTSE 100 rose in value over the 5 years I got~ 5% AER, if it declined I get 0%, but my £1000 back.

The start reading of the FTSE 100 (presumably December 2, 2004?) was 4753.40

My maturity letter states the finishing FTSE 100 is 4469.29 (and this has been worked out as "...the average of the monthly official closing index readings over the final period from 26 November 2008 to 25 November 2009."

So as you can see this is a decline, meaning my £1000 was locked up for 5 years with no return

However what I would like to question the members on here is if this correct? I see the FTSE 100 closed on December 1st 2009 at 5312.17. I'd post a link but I'm not allowed, but a quick search on Google confirms this

How is this fair? Why isn't the FTSE 100 taken December 2, 2004 to December 2, 2009...5 FULL years???

I feel almost scammed. I know its not "my" money, but it does seem a little unfair

opinions4u

It works both ways.

If the FTSE had performed splendidly for 5 years and then suffered a "Black Monday" style crash on the day of maturity, the policy of taking the average value over the last 12 months would have saved you from a nil return.

It's not a T&C designed to catch you out. It is, unfortunately, just one of those things that will sometimes benefit you and at other times penalise you.

(by the way, these savings plans are usually poor and not worth touching with somebody else's bargepole).

gozomark

Its fair because thats what's in the T&C

kostigovs

The averaging period is pretty much the norm with these types of inverstment

Dom3663

So in theory, now is probably a good time to be doing this sort of investment?

With the economy on the mend (arguably) the FTSE will have a starting value of an average of the last years FTSE 100? Which is currently about 900 points below its current value?

Ie Start value of 4469.29, with an end value of the next years FTSE 100? (On a 1 year bond that is)?

dunstonh

So in theory, now is probably a good time to be doing this sort of investment?

There are a small handful of decent ones out there but the time to invest in them (with hindsight) was earlier in the year. Most of the current ones though are quite poor quality.

he FTSE will have a starting value of an average of the last years FTSE 100?

No. The averaging only takes place towards the end (typically the last 6-12 months). Not the start. The "strike date" as its known (day of investment) takes the value of the FTSE that day. So, if it was now, it would be 5312.