Halifax Income Generator 7.45%

dunstonh

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

There is a virtually identical structured product available via IFAs that gives 11% p.a. on the same basis as Halifax paying 7.45% except its growth based rather than income (i.e. paid on maturity) And with a stronger market counterparty. So, the Halifax product looks very poor value. Plus, Lloyds as a market counterparty is risky. The extra risk is reflected in the income rate.

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.

It is not as unlikely as you think. A number of suppliers have stopped using Lloyds as a market counterparty because the current structure would allow for certain parts of Lloyds to be made insolvent without affecting the retail banking side. The market counterparty could very easily be one area that is left to go under.

switch76

dunstonh wrote: »

There is a virtually identical structured product available via IFAs that gives 11% p.a. on the same basis as Halifax paying 7.45% except its growth based rather than income (i.e. paid on maturity) And with a stronger market counterparty. So, the Halifax product looks very poor value. Plus, Lloyds as a market counterparty is risky. The extra risk is reflected in the income rate.



It is not as unlikely as you think. A number of suppliers have stopped using Lloyds as a market counterparty because the current structure would allow for certain parts of Lloyds to be made insolvent without affecting the retail banking side. The market counterparty could very easily be one area that is left to go under.

Do you have a link to the product that gives 11%?

bigfreddiel

switch76 wrote: »

Do you have a link to the product that gives 11%?

no chance of this being revealed - its for ifas only - its a closed shop - us mere mortals couldn't possibly be trusted or have the intelligence to handle such a product -besides the ifa needs his annual fee and set up charge doesn't he.

atypical

opinions4u wrote: »

So 260 get out clauses over the term?

You would lose the income for any week it was below 3,000, not capital, in return for an extra ~10% (0.75% absolute).

Largely irrelevant now seeing as there's 11% on the same terms.

rockitup

switch76 wrote: »

Do you have a link to the product that gives 11%?

Maybe it's this one from Aviva

http://www.comparestructuredproducts.com/Structured-Product-Information.aspx?Name=Aviva-Investors-Defined-Growth-Fund-3&ID=3071&ProviderID=98

ses6jwg

You'd be better off with a corporate bond fund or ETF, you get the benefit of inflated income without the volatitliy of being linked directly to the FTSE 100

Ilya_Ilyich

rockitup wrote: »

Maybe it's this one from Aviva

http://www.comparestructuredproducts.com/Structured-Product-Information.aspx?Name=Aviva-Investors-Defined-Growth-Fund-3&ID=3071&ProviderID=98

Nah that only pays out if the index increases.

amcluesent

Just make sure you use an 'advisor' when you buy the product, then if it goes pear shaped sue for compo for being missold.

dunstonh

bigfreddiel wrote: »

no chance of this being revealed - its for ifas only - its a closed shop - us mere mortals couldn't possibly be trusted or have the intelligence to handle such a product -besides the ifa needs his annual fee and set up charge doesn't he.

You are correct that it is available via IFAs but you are wrong on the rest.

grey_gym_sock

i can't see how this kind of product could be suitable for anybody. they seem to be aimed at relatively low-risk investors - people who wouldn't want to put all their money in the stock market, but might be happy to take on a little more risk than staying in cash. but you are acting as an insurer for somebody else's losses if the stock market crashes (by 50%). you are writing disaster insurance. in exchange for a premium of 2% or 3% per year (i.e. however much 7.45% exceeds the best risk-free fixed rate for the same term), you are taking on the risk in case of an unlikely, but possible, large fall in the stock market.

if you are a relatively low risk investor, you would be better off putting a small proportion of your money in the stock market (e.g. 20%), and keeping the rest (e.g. 80%) in safe investments. then, if your stock market investments fell by 50%, you would only be down by 10% overall; so the worst case is much less bad.

(the 11% product which was linked to isn't exactly comparable the 7.45% one, but it does suffer from a same issue, that you are writing some kind of insurance against stock market falls.)