Fixed Rate Bond ISA, too good to be true?

edited 31 July 2018 at 1:48AM in ISAs & Tax-free Savings
11 replies 1.6K views
GuerillatokerGuerillatoker Forumite
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edited 31 July 2018 at 1:48AM in ISAs & Tax-free Savings
Completely new to ISAs here. Struggled to find anything on the main guides to answer this.

I have spied a website that offers "Fixed Rate Bond ISAs" over 2-5 years, offering 6-9% p.a interest, with a £5000 minimum. I am refraining from naming them as this post sounds enough like an advert as it is.

This is significantly higher than any other savings option I have found and I would like to know why. I understand that such an ISA is not guaranteed due to being an investment product, so I presume this could be the reason, but it still seems high to me - especially since they make a point of noting they've not failed to pay the rate yet.

Is this just a run of the mill Stocks & Shares ISA that is boasting of high returns? If so, is this the kind of interest expected from any wisely picked S&S ISA?

Thanks in advance if anyone can clear this up. I'd be lying if I said I knew much about savings past your bog standard regular savers and instant access.

NOTE: I'm already taking advantage of a high interest current account, but I'm well over the limit of that now.
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Replies

  • Tom99Tom99 Forumite
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    [FONT=Verdana, sans-serif]Its not a savings product, its not a bond and its not guaranteeded.[/FONT]
    [FONT=Verdana, sans-serif]You might get your 6%-9%pa or you might not.[/FONT]
    [FONT=Verdana, sans-serif]You might get all of your capital back or you might not.[/FONT]
    [FONT=Verdana, sans-serif]So its very high risk and usually the description of what they will invest your money in is at best flaky.[/FONT]
    [FONT=Verdana, sans-serif]I would say expecting 6%-9% from a S&S investment is to high. A margin of +2%/3% above inflation would be more realistic but in the short term that could differ widely.[/FONT]
  • edited 31 July 2018 at 7:05AM
    masonicmasonic Forumite
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    edited 31 July 2018 at 7:05AM
    These "fixed rate bond ISAs" offering 6-9% interest are usually loans to single companies where there is a risk of losing all of your money and no regulatory protection. They are not suitable for consumers and are marketed at high net worth individuals who can afford to lose all of the money they invest.

    They are not conventional savings or S&S investment products.
  • edited 31 July 2018 at 8:39AM
    AlexlandAlexland Forumite
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    edited 31 July 2018 at 8:39AM
    masonic wrote: »
    They are not suitable for consumers and are marketed at high net worth individuals who can afford to lose all of the money they invest.

    Sadly they are marketed at just about anyone via Facebook, The Telegraph, etc and how they get away with this baffles me. In my area Facebook have placed poster adverts explaining how seriously they take everything following recent scandals but they would be better focusing their efforts in filtering out the masses of misleading adverts.

    It's beyond a joke - people are being tricked into taking high unexplained risks with their life savings.

    Anyone reputable should have a zero tolerance to these adverts and check before they publish rather than rely on the public to report adverts arguing the content is somehow beyond their control. It's absolutely within their control and they are ultimately responsible for what appears on their website.

    It's just more profitable for The Telegraph, etc not to check stuff, take the advert revenue and hope nobody ever holds them to account for people's financial losses. If everyone did they would be sunk.

    Alex
  • edited 31 July 2018 at 12:00PM
    GuerillatokerGuerillatoker Forumite
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    edited 31 July 2018 at 12:00PM
    Thanks for your advice guys. It definitely sounded too good to be true. If we were not so close to what will no doubt be a volatile 2019 I think I may have been inclined to take the gamble.
  • dunstonhdunstonh Forumite
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    It definitely sounded too good to be true.

    its not too good to be true. It is what it says it is. The issue is that you thought it was something else.
    If we were not so close to what will no doubt me a volatile 2019 I think I may have been inclined to take the gamble.

    It wouldn't matter where we are in the economic cycle. I wouldn't touch it with a bargepole. Either personally or professionally.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • masonicmasonic Forumite
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    Thanks for your advice guys. It definitely sounded too good to be true. If we were not so close to what will no doubt be a volatile 2019 I think I may have been inclined to take the gamble.
    I wouldn't touch something like this either. Some, including myself have branched out into peer to peer lending, which is a more sensible option if you are looking to achieve a higher return from something other than stockmarket investments - but it is still higher risk and it would be sensible to limit your exposure. There are various threads covering P2P, so I won't go into more detail here.
  • kidmugsykidmugsy Forumite
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    It's a long time since I did so, but I suspect that playing poker would be more fun and not much dafter as an "investment".
    Free the dunston one next time too.
  • jimjamesjimjames Forumite
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    Thanks for your advice guys. It definitely sounded too good to be true. If we were not so close to what will no doubt be a volatile 2019 I think I may have been inclined to take the gamble.

    If you're prepared to take some risk then surely a S&S ISA would be a better option as that is FSCS protected.
    Remember the saying: if it looks too good to be true it almost certainly is.
  • PrimrosePrimrose Forumite
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    I didn,t think Stocks and Shares ISAs were in any way protected - only cash ISAs up to the Government comoensation limit? .
  • AlexlandAlexland Forumite
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    Primrose wrote: »
    I didn,t think Stocks and Shares ISAs were in any way protected - only cash ISAs up to the Government comoensation limit? .

    Obviously the government doesn't guarantee your investment performance but you have some protection against fraud or if the client assets are not correctly segregated from the platform's business, etc.

    https://protected.fscs.org.uk/banking/stocks-shares-isas/

    Alex
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