Opinions pls on the Post Offce FTZSE fixed bond

lynzpower

When they cant sell me credit cards or loans, they try to flog me some sort of savings/investment!!

Ok, so posting some parcels off the other day and our mates at the PO offered me this little number.

half of investment at 7.5 AER the other half a "50% of ftse" tracker. Fixed in for 5 years, withdrawing anything would negate any gains. original investment "safe" as its a saver effectively.

I was considering putting a fairly small amount of money in this ( 5-10k?) Im tending more towards 5. We'll have the 14k for April's ISA allowance aside in another internet saver, so we wont "need" thisand will certainly be able to do without it for 5 years. It opens in Feb 08.

these are some older articles about it- i was given a leaflet in the PO.
http://www.banking-business-review.com/article_news.asp?guid=A76A280D-F51A-4E12-BD49-205CB3292A3D

http://www.news.royalmailgroup.com/news/article.asp?id=1956&brand=Post_Office_network

the guy at the PO ( and in the leflet itself) suggests the return is someqhere around 43-47% compounded over 5 years.

This is the 1st one of these sort Ive really looked at, are they any good? Any obvious pitfalls? Anything else perform better than this?!

Sorry, v new to this sort of thing.

( Ive got this years ISa in S&S one ethical with L&G, the other with Jupiter Ecology both full )

Ive got a reg saver at 350 and another internet saver for the "extras" ( money saved/ gifted money/ windfalls etc) which is totalling about 15k at the mo and isnt working that hard.

thoughts/ opinions v welcome

Cheers

Lynz
x

jamesd

It looks like the usual poor deal from a GEB. Compare with how to beat a GEB with funds.

You'd probably want to use just the equity fund since it'll be outside a tax wrapper in your case.

dunstonh

Awful product. Awful terms.

Do a search in this section on guaranteed equity bond and you will see all of the regulars condemning it. I havent seen a good one since the mid 90s.

Main negative on this one is you get no dividends and only 50% of the growth.

Lets say the FTSE100 rises 2500 (from a base of 6400) which is about right for the FTSE100 as an estimate, that is a 37% gain. You will get only half that amount giving you a total gain of 18.5% over 5 years.

Its a waste of money and a cash cow to the post office.

Aegis

It's a guaranteed equity bond, and generally speaking they're considered to be terrible products for about 3 reasons:

1. The actual guaranteed amount will probably end up being below inflation. If you were offered an account at 3.75% AER, you'd probably turn that down. Well, that's your guaranteed amount, and nothing more.

2. There is a fairly high probability that the FTSE will either not grow or will grow by a miniscule amount in the next 5 years. If you go by what a few cycle theorists say, we're due for a downturn some point before too long, and it might mean that the FTSE falls significantly from it's current high and therefore makes it unlikely that you'll have much growth to show for your investment.

3. They don't pay you the dividends that you would be owed as a normal investor. Instead they keep the dividends (which may be 3-5% per year, more than your guaranteed growth in a lot of cases!)

All in all, it's a pretty poor way to invest in stocks, though I can see why a lot of people would think it was a good one. It's like with Premium Bonds: secure capital sells even when the actual predicted growth is fairly low!

caliston

See this thread comparing it against an index tracker investment:
http://forums.moneysavingexpert.com/showthread.html?t=571217

dunstonh

Just want to add that there is currently a 140% FTSE growth option available through IFAs so that just highlights how bad this 50% option is.

Still dislike the product though.

lynzpower

THANK YOU ALL :beer:

God, I love you lot, your all so helpful !! Ill head off and check out the links posted, thanks again