is this too good to be true

merl1955

Help
Our instant cash ISA's with barclays the interest is to be reduced to 2.25% we have ISA stock and shares already for this year.we have a considerable sum (well it is to us £16,000) in the AA internet saving account.
Santander have suggested we tsfr our cash ISA's to theirs giving us 5.5% he advised us that we could put our other money saved in AA account into a bond which offers tax free savings of 4.25% for 4years. talked about capital gains tax which we don't understand.
To put £1000 per month as a drip feed into the stock market cautious approach to stock market investing in bonds (although we know there is no guarantee) then to open regular savings accounts at 6%
Can anyone explain how we can have the bond savings without paying tax on it and does all this sound too good a plan.
We aren't sure how long we can continue to save £1000 per month
due to retirement looming.
and why aren't these rates with other banks or building society's

dunstonh

talked about capital gains tax which we don't understand.

Deposits dont attract capital gains tax. So, that must mean he is referring to investments.

Can anyone explain how we can have the bond savings without paying tax on it and does all this sound too good a plan.

Use the ISA allowance for the bonds and keep the equities unwrapped. Then bed & ISA each year to ensure the ISA allowance is fully utilised.

Hopefully you not thinking about using Santander for any of your investments as they are dire.

Catbells

dunstonh wrote: »

Hopefully you not thinking about using Santander for any of your investments as they are dire.

Have just talked with a Santander manager at local branch and am now interested in the Guaranteed Return Plan investment which sounds very attractive (see my recent post) with a 10% return if you leave for 5 years using ISAs and unit trusts as their base. Why do you say they are dire as they are FSA protected??

alanq

The Santander "Return Plan" (note that the word Guaranteed is not included in the product name) offers a minimum growth of 5% (that's not 5% p.a.-c 0.82% p.a.) over the course of 6 years. Maximum return is 30% over 6 years which equates to under 4.5% p.a. not subject to income tax but is subject to CGT.

http://www.santander.co.uk/csgs/Satellite?appID=abbey.internet.Abbeycom&c=Page&canal=CABBEYCOM&cid=1210610645672&empr=Abbeycom&leng=en_GB&pagename=Abbeycom%2FPage%2FWC_ACOM_TemplateB2

You can get a guaranteed 4.5% from SAGA on a 5-year bond which doesn't depend on the performance of the stock market but would be subject to income tax.

Santander regularly rate with the lowest level of customer satisfaction in surveys. They get enormous numbers of customer complaints that they fail to deal with promptly.
http://www.moneysavingexpert.com/news/banking/2010/08/santander-worst-bank-for-customer-service

dunstonh

Have just talked with a Santander manager at local branch and am now interested in the Guaranteed Return Plan investment which sounds very attractive

Don't take this the wrong way but the banks are set up to sell low quality products by low skilled sales staff to low knowledge consumers who wouldnt know good or bad.

Why do you say they are dire as they are FSA protected??

They are not FSA protected. They fall under the authorisation of the FSA but that doesnt measure the quality of the product.

Lets look at the Santander Growth Plan (Issue 36)

The plan has a guarantee that at the end of 6 years you'll get back your original investment, with a minimum return of 10%, with the potential to earn 50% of Index growth with no cap.

What that actually means is that you will get 1.6% a year for 6 years. (thats the 10%) hand half the growth in the FTSE in that period with no dividends.

Why do you want half the growth and not all of the growth? What about the 3% a year dividends you are not getting?

You are giving up so much for so little in return.

Now lets look at the one that interests you. The Santander Return Plan.

A 6 year investment where you could receive your money back plus 30% of your original investment in the event that the FTSE100 Index has not fallen below 80% of its starting level at any time during the observation period (over the last 5 years of the investment term) or 5% of your original investment if it does.

That plan equates to a maximum of 4.45% p.a. equivalent. That is dire for a FTSE backed structured product. You can get various versions on the whole of market that are paying 7-8% for near identical terms to Santander or Kick Out versions paying out over 10% with highly rated market counterparties (on par with Santander or better). That assumes you really want a structured product and not conventional investments.

Of course, the Santander manager as you call him, or Santander sales rep as the rest of us know him as, can only sell Santander products. So, you shouldnt expect good quality.

Has the sales rep discussed conventional investments with you? Again, they dont have anywhere near a good enough range but you can get cautious investments with decent yields and diversification that offer uncapped potential. If you are making an informed choice to go with structured products rather than conventional investments then fair enough. However, if no comparison of the pros and cons have been made then that is not good.

merl1955

thank you for some advice but still haven't understood Santander have offered the deal of super bond 4.5% for 4 years which would allow us to have the ISA super savings at 5.5% for a year. If we went for this package we could have the regular savings at 6%.

Reaper

In simple terms:

The pros:
* You get a good cash ISA as part of the package.
* It sounds like the investment part is taxed under Capital Gains instead of Income Tax. Just like Income Tax you have a free allowance before you start paying tax on it. This is currently £10,100 profit before it starts being taxed. So if you have not used the allowance for anything else it will be tax free.

The cons:
* You are forced to take out their investment to get the ISA
* The investment part has an element of risk (though small). Normally you expect better returns in exchange for risk. There are better alternatives out there.

ashteadgirl

Being very cynical I think it is called a sprat to catch a mackerel. Also do not jump into things lightly with Santander - had untold hassles for 5 months when my elderly Mum opened a fixed rate bond with them. The whole thing took many visits to branch, phone calls and immense worry for my mum. A complete showing of how incompetent they are. Delighted to take your money but woe betide you if you need to speak to the department that manages it - they are not allowed to speak to customers directly!

dunstonh

Being very cynical I think it is called a sprat to catch a mackerel.

No cynicism required. That is exactly what they are doing.

They are using a decent cash ISA rate that is cross subsidised by an awful investment product. The ISA benefit is just for one year but the investment product is for 6 years.

rockitup

dunstonh wrote: »

That plan equates to a maximum of 4.45% p.a. equivalent. That is dire for a FTSE backed structured product. You can get various versions on the whole of market that are paying 7-8% for near identical terms to Santander or Kick Out versions paying out over 10% with highly rated market counterparties (on par with Santander or better). That assumes you really want a structured product and not conventional investments.
.

Hi Dunstonh,

These kickout structured products paying out over 10%, can you let me know which provider(s) is/are offering these. I am not a great fan of SP's but might be interested in a punt on one of these kickout plans.

Thanks

premierfella

Morgan Stanley FTSE Bonus Growth Plan 3 offers 10% p.a. (simple, no compounded, so AER equivalent would be sub-10% p.a.). Not a recommendation, and obviously there are various risks attached as is usual with structured products. I think closing dates for the 10%+ ones that were on the market have all passed now (I could be mistaken though).

Edit: I think I was mistaken. There is also the RBS UK Growth Early Kick Out Plan 4