Credit Suisse 6 year protected capital

doug-no-less

In 2011 I invested £6000 for each of my children (2 boys) in the above plan at a local building society.
I received a letter today saying that the FCA has fined Credit Suisse for producing unclear marketing material.
In a nutshell the plan guarantees the capital and a minimum return of 3.19% and a maximum of 8.14%. They have been fined because likelihood of the plan ever reaching the maximum is practically zero and this was not stressed enough in the literature. Here are my three options:
1 I am being offered an immediate cancelation, the initial sum/s returned and an AER of 3.85% 'compensation'.

2 Or I can make a complaint based on a supposed loss I have made by not investing in something else.

3 keep it running until maturity.


The first option in one way seems okay the letter states that I will receive a minimum of £1409.85 plus original investment. However I am annoyed by the term 'compensation' as it barely seems to be this and might be better described as 'due'.

Option two seems closer to the true case. I find it hard to recall what rates were offered elsewhere but am fairly confident the percentage rate started with a 4 for some of them and all were a shorter period. Finding historical investment plans on the internet is harder than I envisaged.

Option three? It's strangely difficult for me to contemplate. Having received a letter which in a way dams the investment and not being particularly financially savvy I want to run from it screaming with my I arms waving. But in the letter the investment which has a total of 12 observation dates (bi-annually) has had 5 so far as follows:
5.00%
-2.59%
5.00%
0.82%
5.00%
Giving the sum gain as 13.23 (5.10% AER)
Which-leaves me clueless due to the aforementioned lack of financial savvy. (Though even I can see that it is more than the 3.85% offered).
Appreciate any thoughts from the more investment enlightened.
£12000 is a huge sum of money in this household.
This is money for my kids one of whom is severely disabled and thus very important to his/their future.

alanq

What's the tax position? "Compensation" may be tax free but interest taxable.

"This is usually based on what would otherwise have happened to the consumer’s money. This kind of compensation is not usually subject to income tax – even if it is calculated by reference to an interest rate."
http://www.financial-ombudsman.org.uk/publications/guidance/comp_tax.htm

3.85% tax-free is equivalent to 4.81% for someone paying tax at 20%.

xylophone

Are these plans held in bare trust for your children or are they merely designated or are they wholly in your name?

How old are your children?

doug-no-less

Thanks for responding.
I don't believe the plans are subject to tax even if they mature as I filled in an (R 85?) tax exemption for both plans.

doug-no-less

I am stated as the account holder of the two plans. And each has the child's name under 'designation'
The children are 10 and 9.
Thanks

xylophone

If these accounts are merely "designated" so that you, rather than your children, are the beneficial owner of the funds, then you would only be entitled to register R85 (if appropriate) if you yourself were a non-taxpayer - are you?

See https://select.bestinvest.co.uk/investment-guidance/investing-for-children/trusts-and-designated-accounts

And does this plan pay interest (rather than dividends) because if not, an R85 was not appropriate?

Even if the plans had been held in bare trust, if you as the parent ( rather than granparent, relative etc) provided the capital, the £100 rule would have applied.

http://uk.virginmoney.com/virgin/savings/learn/childrens-accounts/

"There are special rules in place with HMRC if the savings have been given by a parent. If gifts from a parent produce more than £100 gross income a year, the whole of the income from the gift is normally taxed as the parent’s income and a child cannot get back any tax on that income. Nor can interest paying accounts be registered to have interest paid without tax taken off. The £100 rule applies separately to each parent. The £100 rule applies to income earned each year and it does not matter whether the fund is comprised of part capital and part added interest. The £100 rule applies as long as income is over £100 in any one year for any one child from one parent."

The £100 rule does not apply to CTF/JISA https://www.gov.uk/child-trust-funds/overview

If, as it would appear, the money belongs to you, rather than to the children, you might choose to take the money out of the plan and reinvest the money into your children's CTFs this year and next? ( You may contribute up to £4000 per child per year now, and from April next year you will be able to transfer the CTF to the more flexible JISA).

http://www.theguardian.com/money/2013/dec/29/child-trust-fund-cash-transfer-junior-isas

Icesaver

doug-no-less wrote: »

Option two seems closer to the true case. I find it hard to recall what rates were offered elsewhere but am fairly confident the percentage rate started with a 4 for some of them and all were a shorter period. Finding historical investment plans on the internet is harder than I envisaged.

If it's any help I opened a 5 year fixed rate Account with Birmingham Midshires offering 5.05% in June 2011

katiejr

I am in the same situation having just recieved the same letter giving me the option of cancelling the plan and getting interest to date and no penalties, it also states that I can accept the offer and still make a complaint, I am confused whether to accept the offer and just forget it or to make a complaint, if so on what basis

davidtgordon

I am in a similar situation. On what basis can I claim additional compensation beyond that offered of 3.98%? The view that a 5 year fixed rate account offered 5.05% in 2011 is most helpful. Anyone open a long term fixed rate account in October 2010 when I opened my plan. The letter states that the sums payable are taxable so although they are described as "compensation" they are in effect just an increase in the guaranteed minimum and an opportunity to cash out which I may take.

CKhalvashi

'Compensation' and 'Interest' have very different tax meanings, even if the R85 documents are in effect.

As a parent, this has been the case for as long as I can remember.

CK

kenwood

I opened one of these through YBS on 29th June 2011 and it is a 6 year plan. I put in £9000 (a matured old TESSA).

I still have the original documentation which shows what was offered.
It's the Protected Capital Account - Tracked Growth 23.
It promised minimum 23.5% (gross) equivalent to 3.85% AER, up to a maximum of 60% (gross) equivalent to 8.14% AER.

I have yet to receive a letter from YBS and/or Credit Suisse regarding this.