Scottish Widows

chachiluz

Help please?!
I opened 5 years ago a Guaranteed Stockmarket Bond with Scottish Widows, it has matured this month. My initial invesment was £3,000 now I have £3,276.58. Can someone explain what will the interest be, also I feel that this is very small, would I have gained the same by leaving the money in a building society?
Many thanks.
Chach
xx

jem16

Your return has been 9.22% over 5 years, basically 1.84% per annum - very poor. It's not interest as it's stockmarket based. It sounds like it's a GEB and everyone here would tell you to stay very clear of it.

You would definitely have gained more by having it in an ordinary savings account.

Aegis

chachiluz wrote: »

Help please?!
I opened 5 years ago a Guaranteed Stockmarket Bond with Scottish Widows, it has matured this month. My initial invesment was £3,000 now I have £3,276.58. Can someone explain what will the interest be, also I feel that this is very small, would I have gained the same by leaving the money in a building society?
Many thanks.
Chach
xx

There are a few threads around here detailing why GEBs are a very bad deal for the consumer despite sounding like a very good idea.

Unfortunately there's not a lot you can do about this now except to learn from the experience and not buy in to the same sort of product again!

Apreciar

jem16 wrote: »

Your return has been 9.22% over 5 years, basically 1.84% per annum - very poor. It's not interest as it's stockmarket based. It sounds like it's a GEB and everyone here would tell you to stay very clear of it.

You would definitely have gained more by having it in an ordinary savings account.

The 9.22%return divided by five years is 1.84%, but if you allow for compounding it is only 1.78% per year. Not very good at all.

chachiluz

Many thanks for your overall support. My Lloyds tsb account manager sugested that I put some money on this bond..... this was before my mse days..... many thanks and I am very very dissapointed.

Thanks again for explaining this to me.

This with me bying Deustche telecom shares have been the worse finance decision.

munk

If you search through the posts by me you should find some info on the SW Guaranteed Investment Bond (GIB) (SW's term for a 'Guaranteed Equity Bond' (GEB). Basically the thing is a rip off - my mum had £5k of her money tucked away into one of these by a Lloyds tied adviser and I was gutted when I read up on the damn thing...

You lose on a number of fronts with any GEB but unfortunately SW's GEB is particularly bad. First up there's the initial charge which is a stonking 6.6%. This basically wipes out any chance of making any decent profit at all and you'll be doing well to scrape a couple of percent pa in interest even after 5 years of investment because of the appalling initial charge - as you know unfortunately.

Next up there's the way the GEB is structured which is particularly bad by any standard IMO - you have just 2 pricing points per year, ie a total of 10 over 5 years. The FTSE price at each pricing point is taken and you can make up to a maximum of + or - 3.5% profit/loss for each pricing point (ie if the ftse was up 5% at one pricing point the profit you'd get on your GEB would be capped to +3.5%; if it was down by 5% at one pricing point your loss would be capped to -3.5%).

On this basis, the very best you could possibly hope to make would be 35% - a paltry 7% pa (the FTSE's I'm fairly sure has consistently beaten this over probably 90% of the time at least).

Finally there's also the fact that GEBs don't pay out dividends like shares or funds do - if you'd invested directly in the FTSE you'd get a dividend payout on top of the profit/loss you made from the price change of the FTSE shares. The GEB doesn't pay this out, so you're losing out even more on this.

Importantly - the GEB offers a guaranteed 110% of your initial investment after 5 years (at least on my mum's policy any way), so I'd look into that if I were you. Your return is under that (although I wonder if you were taxed or something to make the return under 110%?).

Finally take any 'financial advice' offered by any bank with a truck load of salt

chachiluz

That's the very last time I listen to Lloyds adviser, in fact if I have the opportunity i'll let him know what to do with the advise. I wish I put the money at the time on an ISA or something like that, at least i wouldn't had lost in value.
Any ideas on what to do with the money know? I can put it in my cash Isa i have an A&L . Ideas please.

dunstonh

Had you invested in a proper stockmarket fund with say medium risk then you would have doubled your money in that same period.

If risk was a concern, you can build your own GEB in effect by placing half the money in a cash ISA and half the money into a unit trust. Over a 5 year period, you could suffer around a 50% loss on the unit trust unit price and still break even.

Banks, even those tied to known brand insurance companies, cannot offer you best advice. Lloyds, for example, offer scottish widows products but they are more expensive and cut down versions of the IFA scottish widows products. Plus, tied agent advice is far more limited in what they can and cannot do compared to IFAs.

munk

chachiluz wrote: »

That's the very last time I listen to Lloyds adviser, in fact if I have the opportunity i'll let him know what to do with the advise. I wish I put the money at the time on an ISA or something like that, at least i wouldn't had lost in value.
Any ideas on what to do with the money know? I can put it in my cash Isa i have an A&L . Ideas please.

I share your anger, I'm still mad after finding out 3 months ago how the lloyds adviser had suggested my elderly mum invest the majority of her money into various SW investments - all of them were very expensive in terms of charges and cost nearly £5k in charges between them (compared to an absolute max of maybe £500-1000 if I'd invested the money myself or she'd gone with a decent IFA:( ).

Only thing to do is just put it down to a bad experience and move on. There's no comeback on my mum's situation (probably yours too) because the advice that was given wasn't bad advice - unfortunately the products she was sold were on the costly side, but just enough for Lloyds/SW to get away with it. Still daylight robbery/mugging IMO...

I would say look at investing in an ISA either cash or s&s... think dunstonh mentioned this above. If you go for S&S ISA look maybe at Hargreaves Lansdown, Cavendish, Bestinvest? There's a s&s ISA guide on the clicky links at the top of this forum next to Martin's mugshot (probably under the BANKING / SAVING link)