Barclays wealth "defined returns plan"

triplea35

You can buy these products from an execution only ( no advice) online broker and receive as much as 2.5% of the commission paid to the broker back. The commission return was added to my original investment.
I used: http://www.moneyworld.com/Income_Bonds/index.htm
the link should give a wide choice of the plans available from different companies.
A similar plan to the Barclays Wealth is the Investec Enhanced Kick Out Plan which pays a higher return for presumably a higher risk company though Investec appears a well established Bank. They are currently offering 12% with Investec and 10.25% with Santander.
I took one out(Plan 6) last October when the FTSE was 5281 so will mature if the closing 5 day average upto the 19th October is above this.
If it does then I will receive 12.5% interest on my original capital+ 2.5% so in effect a 15.3% return. Their previous five Enhanced Kick Out Plans (first one was in March 2009) have all matured after one year.
I did not invest a huge amount and am not too concerned if it doesnt mature in October, almost preferable to have it run another year or two until maturity.
Another thing worthy of note is the return on capital is only actually subject to Capital Gains Tax and can be kept in a ISA.
I chose not to put it into an ISA and will use it to utilise some of my wife and I's Captial Gains allowances (2 x £10100)

I am certainly not qualified to offer any advice and just relaying my experience todate of using a similar product.

dunstonh

The investec plans consistently fail to pass our research criteria. many ofl the Barclays ones pass. You have to be wary that its not just the headline terms you are comparing but also the level of risk that you are taking. That doesnt make the investec one bad. If you accept its failings then its fine. Just be wary that you have to dig deeper than just the headline product terms.

Loughton_Monkey

Cautious_Investor wrote: »

Personally, and this is not advice, I think for the potential risk a return of 9.1% per annum is not too shabby.

the Cautious Investor

This depends on attitude to risk. This type of investment is a strange mixture. Most of it invested "as safe as houses", with the balance going into a pure 'punt'. No middle ground here. If you fancy (and understand) the punt, then go for it. But remember that it's this type of product giving those 'Jack the Lads' in the back room their bonuses every year.

Cautious_Investor_3

Loughton_Monkey wrote: »

This depends on attitude to risk. This type of investment is a strange mixture. Most of it invested "as safe as houses", with the balance going into a pure 'punt'. No middle ground here. If you fancy (and understand) the punt, then go for it. But remember that it's this type of product giving those 'Jack the Lads' in the back room their bonuses every year.

I'm not entirely sure I'd describe this plan as a pure punt.

Furthermore I'm quite happy for the 'jack the lads# to make money as long as I do!

I stand by my original thought that a 9.1% return for the level of risk that it is being taken is fair.

The Cautious Investor

King_Weasel

Thanks for all your thoughts, guys.

I'm still pondering. The risk of capital loss is minimal, but there's a clear possibility it won't grow at all for 6 years.

xrjtg

Cautious_Investor wrote: »

I stand by my original thought that a 9.1% return for the level of risk that it is being taken is fair.

It's worth mentioning that, if the plan pays out after 6 years, you only get around 7.5% annually because the 9.1% doesn't compound.

King_Weasel wrote:

The risk of capital loss is minimal, but there's a clear possibility it won't grow at all for 6 years.

If the plan paid out the initial capital after 6 years and inflation ran at 3% a year until then, you would have lost 16.7% in real terms. This should also be considered a risk.

Cautious_Investor_3

xrjtg wrote: »

It's worth mentioning that, if the plan pays out after 6 years, you only get around 7.5% annually because the 9.1% doesn't compound.

Hi

We might be talking at cross purposes here but it should be made clear exactly what the return is on this plan.

The return is 9.1% SIMPLE per year and not compound, therefore if £10,000 we invested and the plan kicks out after two years the return would be 18.2% i.e. £1,820 plus the original capital back. If the plan were to kick out after say five years the return would be 45.5% i.e. 9.1% times five years.

I hope this clears up any confusion.

The Cautious Investor

xrjtg

Cautious_Investor wrote: »

We might be talking at cross purposes here but it should be made clear exactly what the return is on this plan.

I had thought that that was what I was helping to do.

From time to time we get people who take out, for example, three year fixed rate accounts on which the interest quoted was simple, and feel put out that they received a lower AER. The usual way of comparing investment returns is the annual rate of growth: I think it's helpful to point out that this will be lower the longer the plan runs.

King_Weasel

xrjtg wrote: »

It's worth mentioning that, if the plan pays out after 6 years, you only get around 7.5% annually because the 9.1% doesn't compound.

If the plan paid out the initial capital after 6 years and inflation ran at 3% a year until then, you would have lost 16.7% in real terms. This should also be considered a risk.

Haven't checked your arithmetic, but your reasoning is quite correct.

Loughton_Monkey

Cautious_Investor wrote: »

I'm not entirely sure I'd describe this plan as a pure punt.

Furthermore I'm quite happy for the 'jack the lads# to make money as long as I do!

I stand by my original thought that a 9.1% return for the level of risk that it is being taken is fair.

The Cautious Investor

I think you misjudge our little lads called Jack. Clever little monkeys. Do you not consider that while you are tempted by the 'punt', others are equally tempted by the 'reverse punt' that is dressed up as a "structured product" for the bank down the road?

One of you is going to lose your shirt. M'laddo Jack has made his bonus after all!