5 yr Bond

sue311

Hi all
I put £4,000 in a 5 year savings bond for my son in Dec 2006 to help with University costs. He started Uni in Sept 2011 and the account matured in Dec 2011.
The rate of interest was fixed at 3.25% AER.
I have recently had his book updated ready for when he comes home at Easter but the interest is only £12.63.
Could someone tell me if this is right please, I was hoping for a little more than that.
Many Thanks
Sue

psychic_teabag

There should have been about £130 interest in the first year, compounding up to almost £148 interest in the last year which would be about £12.30 per month.

sue311

thanks for that, Ive phone the bank but it was only a capital bond account what ever that is and the interest was on the foosie 100 really disapointing

noh

Sounds like it was not a fixed interest account but a FTSE100 index linked account.
In December 2006 the FTSE was around 6190.
In December 2011 it was around 5500.
I would therefore expect no return at all.

Who was the account with?

VT82

noh wrote: »

I would therefore expect no return at all.

Definitely sounds like it was return of capital only. The £12.63 is probably just the interest that was accrued (at base rate flat?) after the deposit was made, but before the structure of the product started. And to a lesser extent, interest that has accrued since it matured into some holding account.

The annoying thing from someone looking on is that, as the FTSE has gone down in the five years of the product, the people that sold it can say 'at least you got your money back, that wouldn't have happened if you had gambled on the FTSE'. However, it would probably still have shown overall growth in an index tracker over the period beause of dividends. So the salespeople can have their cake and eat it, and convince most people to re-invest hoping for better luck next time.

xylophone

It sounds as though the OP didn't understand what he was buying?
OP do you have the original documents?
Were you told that you were investing in a fixed rate savings bond?

sue311

Thanks for all your replies, I guess i didnt really understand what I was buying because I thought I was investing for my son as it states a fixed rate.
I have original documents but I'm sure that you are all right and I have made a mistake

The account was with the Brittannia Building society so they are a reputable bank, I'm just a bit gutted for my son really, but thank you all again , I will know next time.

nilrem_2

Interestingly enough I was once persuaded to go for one of these types of savings bond with Bristol and West BS (who now belong to Britannia BS/Co-op) It is the only time I have ever taken advice from a financial advisor, they implied that it was most likely that I would double my savings over 5 years and rather stupidly invested £50k, after 5 years the amount of interest I received was precisely Zero, this was quite a few years ago but at the time the normal interest rate was around the 5% mark so I lost quite a lot.

I vowed never ever to go for this type of savings bond again no matter what, I now only go for fixed rate savings bonds!

It also put me off seeking advice from any financial advisor's ever again!