never lose a penny

ses6jwg

davidssmith wrote: »

its a bit of both really. My aunt is 87 and has around 20k to move. She is very low risk but unhappy with interest rates. Her friendly bloke over the road explained a product from a building society which is guaranteed capital pays, 9% minimum but could give her all the rise in the FTSE over the next 5 years upto a max 45%. seems to good to be true so hence my question. her mate derek over the road (who professes to be a font of all knowledge period) has said she cant lose a penny at all as its cash covered by the government? so not withstanding the point about governments going bump is he correct?

You are gambling on the FTSE.

If it doesnt rise she has earned a measly 1.8% before tax per annum.

davidssmith

ses6jwg wrote: »

You are gambling on the FTSE.

If it doesnt rise she has earned a measly 1.8% before tax per annum.

yes but is it as safe a gamble as first seems???

Linton

davidssmith wrote: »

its a bit of both really. My aunt is 87 and has around 20k to move. She is very low risk but unhappy with interest rates. Her friendly bloke over the road explained a product from a building society which is guaranteed capital pays, 9% minimum but could give her all the rise in the FTSE over the next 5 years upto a max 45%. seems to good to be true so hence my question. her mate derek over the road (who professes to be a font of all knowledge period) has said she cant lose a penny at all as its cash covered by the government? so not withstanding the point about governments going bump is he correct?

Does she really want to put the money where she cant access it for 5 years at her age? I doubt that any withdrawals would be allowed.

I would question whether the money is covered by the governement.

The guaranteed return is not very exciting - 9% over 5 years is 1.7% per year. It is taxable.

Check how they determine the final FTSE to determine the rise - these schemes normally employ some sort of average over the final year which could substantially reduce the chances of major increase. Look at what has happened to the FTSE over the past 10 years - its gone down by about 20%.

If she may need the money during the next 5 years why not have a ladder of 3 year fixed rate accounts. Divide into 3, put into a 1 year, 2 year, and 3 year fixed rate accounts. As one matures each year either take the money or reinvest in a new 3 year account. In this way you could get a completely safe return of say 25% over 5 years that really would be covered by the government, with partial access to the cash.

ses6jwg

Also, I would advise against taking any investment advice from "Derek" in future, he sounds a bit of a know it all.

MiserlyMartin

ses6jwg wrote: »

Also, I would advise against taking any investment advice from "Derek" in future, he sounds a bit of a know it all.

LOL! Funny how most people have a bloke across across the road called Derek who know lots.

ERICS_MUM

davidssmith wrote: »

its a bit of both really. My aunt is 87 and has around 20k to move. She is very low risk but unhappy with interest rates. Her friendly bloke over the road explained a product from a building society which is guaranteed capital pays, 9% minimum but could give her all the rise in the FTSE over the next 5 years upto a max 45%. seems to good to be true so hence my question. her mate derek over the road (who professes to be a font of all knowledge period) has said she cant lose a penny at all as its cash covered by the government? so not withstanding the point about governments going bump is he correct?

My view is that the older you get, the greater proportion of your savings/investments should be liquid (i.e. short-medium term savings) rather than tied up in longer term bonds or in much less liquid forms of investments such as shares or property. Of course if the money won't be needed in that elderly person's lifetime then longer term less liquid investments might favour the beneficiaries of his/her estate.

G_M

Seems like Derics mum knows a lot more than her know-it-all boy.

Oops, sorry ERICS mum! Maybe know-relation?

:rotfl:

Reaper

davidssmith wrote: »

Her friendly bloke over the road explained a product from a building society which is guaranteed capital pays, 9% minimum but could give her all the rise in the FTSE over the next 5 years upto a max 45%. seems to good to be true so hence my question. her mate derek over the road (who professes to be a font of all knowledge period) has said she cant lose a penny at all as its cash covered by the government? so not withstanding the point about governments going bump is he correct?

Without knowing which one there are a few things to be careful about with products like this.

1) As said previously there is often an averaging in the last year that reduces its final year of growth.
2) Unlike investing directly you will not get any dividends.
3) There is usually a get out clause. eg you lose the capital guarantee if the FTSE drops by more than 50%
4) Although sold by UK banks like Barclays sometimes they are run by off-shore divisions in which case it comes under non-UK compensation schemes.
5) The guarantee is normally by a third party. In the past most of the schemes were farmed out to Lehmans and you know what happened to them. You can't be sure the government would step in if the guarentee part failed because they back savings not investments.

These sort of products have a LOT of small print. You need to work through it in detail to discover the traps before deciding whether to continue.

nzseries1

Linton wrote: »

Nothing can be absolutely guaranteed - the world could end tomorrow.

There must be some insurance you could take out against that, though?

gozomark

nzseries1 wrote: »

There must be some insurance you could take out against that, though?

Yep, I'll provide it - send me £100 and I'll guarantee any sum against the world ending, not just today, but any day. I'll even give you a stamped envelope just in case you need to make a claim.