Halifax Income Generator 7.45%

switch76

http://www.halifax.co.uk/sharedealing/investment-options/structured-products/offer/

1) Pays 7.45% income each year
2) If, at close of business on the final date of the 5 year term, the FTSE 100 is lower than 50% of its starting level, your capital will be reduced by the percentage amount by which the FTSE 100 level is lower than the starting level.

Do you think this is a good product? What are the risks?

Lokolo

Not worth it imo.

If the FTSE is 50% lower than it is at the moment, you've lost half your capital.

switch76

Lokolo wrote: »

Not worth it imo.

If the FTSE is 50% lower than it is at the moment, you've lost half your capital.

What's the chance of that happening? I think the last time it was at that level was 1993.

Sceptic001

Rated Standard & Poor's A, Moody's A1 and Fitch A (as at 19 January 2012). If Lloyds TSB Bank Plc fails to meet its commitments when due, you may get back less than is due to you or you may receive nothing at all.

You are also betting that Lloyds TSB will not go bust. Also unlikely, but not a risk I would be prepared to take with my savings.

switch76

Sceptic001 wrote: »

You are also betting that Lloyds TSB will not go bust. Also unlikely, but not a risk I would be prepared to take with my savings.

Would the government let that happen? They own 41% already.

1Amigo

switch76 wrote: »

Would the government let that happen? They own 41% already.

Perhaps they sell their share in the next two years and LloydsTSB goes bust a couple more years later.

opinions4u

Lokolo wrote: »

Not worth it imo.

If the FTSE is 50% lower than it is at the moment, you've lost half your capital.

If it's 80% lower, you've lost 80% of your capital!

If, at close of business on the final date of the 5 year term, the FTSE 100 is lower than 50% of its starting level, your capital will be reduced by the percentage amount by which the FTSE 100 level is lower than the starting level.

7.45% is a cracking income. But while you share the downside of the FTSE you don't get to share in the upside.

Might as well invest directly FTSE companies that pay a half decent dividend and have the potential for capital growth.

Ilya_Ilyich

At first glance this seems like a decent option for customers who'd invest in the UK market anyway. Compared to e.g. investing in a tracker fund you're mitigating a lot of downside risk -- in a down market you're getting a better capital return than the index, unless it's over a 50% drop in which case you get the same return, all the while getting a better yield than the index. In an up market you're still getting a 7.45% gross yield which seems pretty strong. Or am I missing something?

Sceptic001

switch76 wrote: »

Would the government let that happen? They own 41% already.

And five years ago who would have predicted that would happen?

atypical

This is similar, but higher return:
http://www.comparestructuredproducts.com/Structured-Product-Information.aspx?Name=Gilliat-Income-Builder-Plus---February-2012-Option-1&ID=3091&ProviderID=102

8.2% per annum provided FTSE is above 3,000 on each weekly observation date.

opinions4u

provided FTSE is above 3,000 on each weekly observation date

So 260 get out clauses over the term?

No thanks.