Santander Guaranteed Growth Plan - Cash in?

Davholsea

My father recently passed away and had a 6yr guaranteed growth pan (non-isa) which we have the option to keep to maturity or to cash in now.
The estate is being divided between four of us and I've been tasked with finding out the pros & cons of keeping this plan to maturity in May 2014.

The plan promises a return of the original investment guaranteed, with an 'aim' to provide a minimum return of 18%.

Basically my question is, does this type of investment roll-up the interest at maturity (thereby making it worth keeping) or does the interest accrue as it goes along (in which will mean that the impact of cashing in now will be limited)

Santander are no help at all - other than to tell me what the current 'cash-in' value is - which is more than the original investment.

Hope that makes sense.

Thanks in advance.

jimjames

It is likely to be based on the FTSE level at different points. Who knows what it will be in April but if you are in profit now you need to weigh that up against what it would be at 18% in APril - assuming the targets are reached - if not then you would just get your capital back so a worse return than the profit now.

Davholsea

Thanks Jim.

So how can I get advise on the likelihood or otherwise of that 18% being paid - and also is that 18% of the original investment or 18% of whatever it is worth at maturity.
(as you can tell I'm struggling to understand this stuff!)

dunstonh

Basically my question is, does this type of investment roll-up the interest at maturity (thereby making it worth keeping) or does the interest accrue as it goes along (in which will mean that the impact of cashing in now will be limited)

There is no interest. The guarantee and terms of the SCARP only exist at maturity. If you surrender it early there is usually an admin charge and if the underlying assets are valued at less than the investment amount then the amount paid out will be lower as well.

Santander are no help at all - other than to tell me what the current 'cash-in' value is - which is more than the original investment.

They are not authorised to give advice or opinion. They can only give facts or factual answers to questions. You may see that as being no help at all but if they did what you wanted they would be in breach of FCA regulation.

So how can I get advise on the likelihood or otherwise of that 18% being paid - and also is that 18% of the original investment or 18% of whatever it is worth at maturity.

What you are asking for is a crystal ball job. No-one can answer it. Look at the terms of the contract. it will say how much it pays and when and what is required to achieve that. Compare the initial FTSE index value at the start (or whatever index was used) to where it stands now. You then have to make a judgement call on whether it is likely to be better to stay until May or take it now. If the surrender value is higher than chances are keeping it would be better but there is no way to say that for sure.

calypso_rhapsody

Santander can't give you advice but if the details of the terms of the investment are not in your father's records, they should at least be able to give you a copy of those. Then, as others have said, you need to take a view on your attitude to the risk that the value will drop between now and next May .... and of course that needs to take account of all four of your attitudes. My guess would be that at least one of you will risk averse and that surrender will be the result - but take a careful look at the terms first.

Davholsea

Folks,
Thanks for your help - at least that clarifies the information I need to ask for and the decision to be made following that.

Many thanks
Bob

jimjames

Davholsea wrote: »

Thanks Jim.

So how can I get advise on the likelihood or otherwise of that 18% being paid - and also is that 18% of the original investment or 18% of whatever it is worth at maturity.
(as you can tell I'm struggling to understand this stuff!)

18% would be based on the initial value.

But it will depend on a number of hurdles. If you can post the terms here then it may help anyone to comment on options.