Should i ditch this long term bond (mutual society)

C_Mababejive

Hi all,,

Way back in 1986 i signed up for one of those tax free mutual society bonds.

The arrangement was that i pay £9 per month from 1986 to 1996 a grand total of £1080.

There was an element of life insurance built into this but i think it was only active for the 10 year period.

The latest statement shows that my £1080 is now worth £3153 and in the last year i.e Dec09>Dec2010 the amount grew from £3118 >£3153 made up of growth of £50.43 and deducted charges of £15.63

All growth is tax free.

Making an assessment of it,although the current growth isnt that brilliant,it seems like the longer term performance has been good? Can anyone quantify that long term growth?

So should i keep this investment and wait for lsightly better times or get the cash and hope to do better elsewhere?

Ta

DavidHayton

C_Mababejive wrote: »

The latest statement shows that my £1080 is now worth £3153 and in the last year i.e Dec09>Dec2010 the amount grew from £3118 >£3153 made up of growth of £50.43 and deducted charges of £15.63

All growth is tax free.

The yield last year was 1.12% tax free.

Over the past 20 years, the average performance has been 5.5% pa. I have assumed that you invested the whole lot: 1080 on 31 Dec 1990, and considered the compound interest over the intervening time: 3153/1080 = 1.055^20.

I think that you should be able to do better than this elsewhere. Assuming that there are no penalties, I would move it into an ISA. You will need to consider your objectives and attitude to risk before deciding between cash (yield of a couple of % or so per annum), or stocks and shares (capital is not secure and the yield is variable).

david

jimjames

I thought these kind of bonds ran for a fixed term so it seems strange that it then continues on but paying a paltry return. What is the ongoing growth/return meant to be?

Over the last 12 months a UK income fund like Artemis Income would have generated a capital return of nearly 16% whilst also paying 4.1% income so a total return of 20%.

The previous year was much higher so it does look like you can get far better returns even by just moving to a bank account.

C_Mababejive

Hmm ..thanks for the feedback..im just seeing the increase from 1000 to 3000 in the period 1996-2010 which looked pretty good albeit i was not considering the period of accumulation which ran from 1986>1996 at a rate of £9 per month.

I assume that after the ten years,they invest it to generate some kind of return?

Maybe they rely on people just forgetting all about them or dying?

jimjames

C_Mababejive wrote: »

Hmm ..thanks for the feedback..im just say the incrase from 1000 to 3000 in the period 1996-2010 which looked pretty good albeit i was not considering the period of accumulation which ran from 1986>1996 at a rate of £9 per month.

I assume that after the ten years,they invest it to generate some kind of return?

Maybe they rely on people just forgetting all about them or dying?

You should definitely contact them to find out exactly what your money is doing. If you have no info on rates/returns etc then it means you cannot make an informed decision.