Nationwide Protected Equity Bond 6 yr fixed

JHB205

Went down to my local NW branch to discuss ISA's and got talking about the above. Does anyone have any experience with this sort of bond???

Is it covered up to 50 000 like normal NW accounts???

Many thanks

apt

It's covered through a different scheme, but it's a terrible product anyway.

dunstonh

Does anyone have any experience with this sort of bond???

Yes. Structured products are very common. Bank & building society versions are typically poor value compared to whole of market versions. Even then, they should be a niche area as once you realise how they work, most of the time you would be better off using conventional investments.

Is it covered up to 50 000 like normal NW accounts???

Up to the strike point it will be but beyond that it will move to investment level FSCS protection but that is unlikely to apply to the market counterparty that underwrites the plan. However, there are some exceptions out there to that).

Skip33

apt wrote: »

It's covered through a different scheme, but it's a terrible product anyway.

Why terrible product?

dunstonh

Skip33 wrote: »

Why terrible product?

Because it's not very good.

I just checked the terms currently offered and they are awful. Designed to be sold by low skilled sales staff to low knowledge customers who wouldnt know good from bad.

steve3812

dunstonh :mad: you never really answered the question why is the product poor? If your going to state the product is poor state why dont blame it on poor sales staff. Surely if your guranteed a min return of 11% you cant lose. If the market does well the 11% could be more.

opinions4u

The growth is capped at 50% over 6 years. That works out at just under 7% AER as a maximum return.

The minimum return of 11% over 6 years works out at 1.75% AER as a minimum return.

If you saved in a traditional fixed term fixed rate account for 6 years at 5% AER you'd get a return of 34% at the end of it.

To me, this plan is effectively asking you to gamble 23% of interest (34-11) to potentially gain just 16% (50-34).

It's a 3 sided coin and 2 sides fall in favour of the provider, not the buyer.

MacsReturns

opinions4u wrote: »

The growth is capped at 50% over 6 years. That works out at just under 7% AER as a maximum return.

The minimum return of 11% over 6 years works out at 1.75% AER as a minimum return.

If you saved in a traditional fixed term fixed rate account for 6 years at 5% AER you'd get a return of 34% at the end of it.

To me, this plan is effectively asking you to gamble 23% of interest (34-11) to potentially gain just 16% (50-34).

It's a 3 sided coin and 2 sides fall in favour of the provider, not the buyer.

Now, THAT's a useful explanation of why it's a poor product

dunstonh

dunstonh :mad: you never really answered the question why is the product poor? If your going to state the product is poor state why dont blame it on poor sales staff. Surely if your guranteed a min return of 11% you cant lose. If the market does well the 11% could be more.

We get multiple threads like this a week. Sometimes I give a short answer, sometimes a longer one depending on how long it was since we had a thread on the same subject.

If you managed to find this thread with the short answer, then you should have been able to find the ones with the long answers as well.

Aegis

opinions4u wrote: »

The growth is capped at 50% over 6 years. That works out at just under 7% AER as a maximum return.

The minimum return of 11% over 6 years works out at 1.75% AER as a minimum return.

If you saved in a traditional fixed term fixed rate account for 6 years at 5% AER you'd get a return of 34% at the end of it.

To me, this plan is effectively asking you to gamble 23% of interest (34-11) to potentially gain just 16% (50-34).

It's a 3 sided coin and 2 sides fall in favour of the provider, not the buyer.

It's worth pointing out that in order to get that 50% growth (i.e. the maximum), the FTSE100, S&P500 and EuroStox50 would all basically need to reach 150% of their current index levels in 6 years. Under economic conditions like that, you'd hope to be more than doubling your investment in a half decent managed fund.

chess_010

Can you please explain further why this is not a good product? It is a 7% min gross AER or greater up to 50% above and if as a ISA plan so assuming that no more money is invested apart from initial payments say £5340 (Max for ISA next year) invested in 2011-2012 ISA plan surely this will be quite good return? not sure of caluation but 7% equals £373.80 added to initial £5340 = £5713.80 . Is this a poor return bearing in mind no one really knows how ecomony will be in future years