Brillant ISA, expires 8th April - is there a catch?

zzzLazyDaisy

Please could someone check this ISA out and tell me if there is a catch?

It appears to be offering 100% capital return, PLUS additional returns regardless of whether the stockmarket rises or falls. I have sent for their brochure, but time is limited, as the offer expires 8th April.


https://www.nvesta.com/investor/default.htm

Thanks

cheerfulcat

Have a look here for a general look at these guaranteed equity " bonds ". Take a good look at the final two paragraphs and note that Eurolife is now called Nvesta -

http://portal.telegraph.co.uk/money/main.jhtml?xml=/money/2005/02/02/cmbond02.xml

Here's the latest news -

http://www.trustnet.com/general/news/display-story.asp?scope=general&id=66511

If you are going to buy one of these bonds, ( and for various reasons, as given in the article, they really aren't a very good investment ), make sure that it is from a big household name like Newcastle Building Society or, better yet, National Savings and Investments.

HTH

Cheerfulcat

Reaper

Martin has an article on these types of investments. Although a bit old it is worth a read. Don't miss the "Additional Technical Note" at the end of the article too.

dunstonh

This can be beaten by Woolwich (130% of the FTSE) and Legal & General (125% of the FTSE).

This one is slightly different as you get growth if it falls. Although there are many variations over the providers and each usually has a few versions.

zzzLazyDaisy

Thanks, what attracted me is the tax free gains regardless of whether the market should rise or fall.... but I can see that they might not be the best investment to go for. Thanks also for the article about Nvesta restructuring - if I do go for one of these, I will stick with a household name. Thanks for that tip!

One final question. Since these bonds invest in the stock market, do they count as Stocks and Shares ISAs? In which case can I invest £3000 in a cash ISA, and another £3000 in one of these?

Thanks for all your help :beer:

cheerfulcat

Hi,

You have to be a bit careful about the ISA situation. These "bonds" don't actually invest in stocks and shares as such; some of them are quite complicated operations, and some, like the Nvesta products, are loans ( real bonds ). If they have a 5 year or shorter term and offer 95% or more capital protection then it is my understanding that the former types, which use derivatives, can only qualify as cash mini ISAs.

HTH

Cheerfulcat

dunstonh

Most of these are now 6 years and don't have units. Either the lack of units or the 6 year term prevents them being classified as cash ISAs.

Debt_Free_Chick

zzzLazyDaisy wrote:

Thanks, what attracted me is the tax free gains regardless of whether the market should rise or fall

But this ISA doesn't do that. There are circumstances where you just get your money back i.e. no gains at all!

payless

cheerfulcat wrote:

Have a look here for a general look at these guaranteed equity " bonds ". Take a good look at the final two paragraphs and note that Eurolife is now called Nvesta -

http://portal.telegraph.co.uk/money/main.jhtml?xml=/money/2005/02/02/cmbond02.xml

Here's the latest news -

http://www.trustnet.com/general/news/display-story.asp?scope=general&id=66511

If you are going to buy one of these bonds, ( and for various reasons, as given in the article, they really aren't a very good investment ), make sure that it is from a big household name like Newcastle Building Society or, better yet, National Savings and Investments.

HTH

Cheerfulcat

Good post

Whilst newer products may have more inbuilt security I remember a raising concerns on this board over a year ago about what "guaranteed" really meant

cheerfulcat

payless wrote:

Good post

Whilst newer products may have more inbuilt security I remember a raising concerns on this board over a year ago about what "guaranteed" really meant

It is interesting to note that the latest Nvesta offering carefully avoids the use of the word " guaranteed ", preferring " capital secure ". In the brochure it states that " in common with all similar investments, the capital return does still depend on the security of the issuer of the underlying bonds " which is of course what went wrong the last time. But I wonder how many innocent investors would really understand what that meant.

Paul_Varjak

A couple of questions:

1. Are these plans covered by any sort of compensation scheme should a default occur?
2. What is the point in using your ISA allowance when the plan is subject to CGT, surely best to reserve ISA allowance for other types of investments/savings?