Guaranteed Investment Account - is it worth it?

rhogley

I'm new to the savings world and would like some advice on the Lloyds - Guaranteed Investment Account.

http://www.lloydstsb.com/savings/guaranteed_inv_account.asp

Less than 3% a year is rubbish, so what are the chances that this would be a gamble worth taking and it could do better?

I can do without some money for 5 years, but is this a place to do it?

Thank you clever people

ManAtHome

Well you can get nearly 6.3% for a 5 year fixed savings account (London Scottish Bank), so yes, less than 3% is carp...

nrsql

You're missing the 75% of market growth - the 15% is the guarantee.

You could put (say) half into a high interest account and half at 120% of growth with guarantee of no loss (I assume they are still available).

Or you could just invest in the market money you are willing to take a risk with and get the dividends too.

dunstonh

The product is designed for the inexperienced investor who wouldnt know the difference between a good or a bad product and buys into the headline information. This GEB is no better than the rest and they are best avoided due to high implicit charges (where the dividends?) and tracking a limited part of the stockmarket.

ukdutypaid

I've been looking at these things for ages.... Dunstonh, gave some very good advice about them not being worth it as investments...
I'm the same, never had any cash before and wouldn't know a good/bad share if I was run over by one.

My take on all these guaranteed things is that they're not invesments at all.
Disagree with me here Duns, but rather than being an Investment fund/account in any way, in effect they are
Long term notice, savings accounts (high/low interest 3%-6.5% type of thing), with penalties, for any kind of early withdrawals (sometimes you can have the income/interest paid out though), with a potential/potentially uncapped bonus payment at the end of the term. (anywhere from 50% [higher AER on the cash bit] of any market growth up to 120% [lower AER on the cash bit].
Depending on which one you go for, you're looking at either FTSE100, 250, Fund of funds, or I've even seen a split of your cash between the FTSE, the Dow and the Nikki.

Just as a back up on my Saving account analogy, I've never seen one yet, classed as an S&S ISA, but only ever classed as a Cash ISA (although not all of these things can be put in ISA's cos of the 3k limit)

There was two "we know what we're talking about" analysts on the World service last night...
One:- Bear market's all over, growth next five years.... approximate zero growth in equities
The other:- Bear market not over, for next 5 years, but bumpy ride ahead.
Big companies, safer/better bet (main Indexes), growth of 50-80%..

So you takes your choice on that one..... Me.... I ain't got a clue...
Ain't gonna get rich on 6% AER though...... Property still where it's at?
(There's even a guaranteed savings account that gives a return (if there is one) on the Halifax House Price Index....!

dunstonh

The typical GEB is not an investment fund but is actually closer to an old fashioned tracker which didnt pay dividends.

Here is a thread with a bit more info: http://forums.moneysavingexpert.com/showthread.html?p=2728519#post2728519

Look at the DIY GEB option in post #3 which doesnt have the absolute guarantee of capital you get with a GEB but the dividends and no cap on growth make up for that

Ian_W

Excellent link dh - missed it first time around so you got 2 thanks for the price of one!

The other thing that's often included in thesmall print, and is in this is:
"The calculation is based on the FTSE daily closing levels averaged over the first 12 months and the final 12 months to smooth out any fluctuations. The potential return at maturity is unlimited, although if the FTSE 100 Index was to rise steadily throughout the 5-year fixed term the effect of this averaging is likely to reduce the overall potential returns. However averaging will also reduce your exposure to the ups and down of the stock market."
https://www.lloydstsb.com/standalone/gia_full_details.asp

So you only get half the growth in years 1 & 5, effectively meaning you have to swim the channel in 4 yrs rather than 5!

Why doesn't the FSA do something about these products? They're pretty near a con IMO to trap the unwary and pay for the champagne at the shareholders meeting! Wouldn't touch with someone else's barge-pole.

dunstonh

The FSA is in love with the banks and it is banks that sell the most of these products. If you look at most of the rule changes over the years, you will see they favour the banks and the bank distribution model.

Also remember the FSA has a fascination with commission and not charges. It would rather an adviser was paid 2% commission and consumer charged 3% than an adviser gettting 3% commission and consumer charged 2%. So, you have to wonder if some of the policy makers for the FSA would know a good product from a bad one?