Fixed Bonds

Mumum

Hello 👋

I have £35,700 to invest in a Trust Account. What with the uncertainties of Brexit, I thought to invest it for a year in a fixed bond and then review the market. I do not want to take any chances (stocks etc) as this money will be for my son’s future. I’ve seen BLME are offering 1.95% for a year’s fixed bond. Are there any pitfalls which I need to be aware of as I am new to this as I haven’t been in this position before. Are there fake sites (I don’t want to be scammed)? To complicate things a little, I’m unsure how a trust requiring two signatories would go about buying a bond. Any insight would be much appreciated from those with experience. Thank you

SonOf

I do not want to take any chances (stocks etc) as this money will be for my son’s future.

Trustees have to be seen to be doing the best thing for the beneficiary. Depending on your son's age, investing may well be the better option for some or all of it. And using savings could actually cause greater real terms losses.

How old is your son and what is the age the trust becomes his?

What with the uncertainties of Brexit,

That is not good grounds for avoiding investing. The UK is around 4% of global GDP. Brexit is a side show outside of the UK.

ColdIron

Mumum wrote: »

I’ve seen BLME are offering 1.95% for a year’s fixed bond.

I think you're out of date, The BLME 1 year is 1.8%. They offer 1.95% for 2 years though. It's a Sharia account but no problems with that, see this short note from MSE

https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/#sharia

Are there any pitfalls which I need to be aware of as I am new to this as I haven’t been in this position before. Are there fake sites (I don’t want to be scammed)?

The provider should be regulated by the FCA and offer FSCS protection. Be very wary of anything greater than mid 2.5% rates or farcebook adverts. Ask here if in doubt. It should be obvious but worth restating, if you lock you money away in a fixed term deposit account you will not be able to withdraw early outside a very narrow set of conditions (read the T&Cs)

Mumum

Thank you for your reply SonOf. It is a little more complicated than that. The trust is mine (medical negligence payout for cancer misdiagnosis). I am in receipt of benefits however so it had to go into a trust. I have no family so had to reach out to get my trustees (3 with 2 signatories required). I will be giving the money to my son however for his safe future. The trustees are doing me a favour as I wouldn’t have otherwise been able to gain from the compensation. They are very busy mothers and business ladies. They want me to be happy with how the money is invested and I don’t want to take risks with my son’s future nest egg. Also, I believe there is a limit to how much can be earned through the investment (£1000 year if memory serves) before tax comes into play? I didn’t go into detail in my first post so as to not complicate things but if you look at my history you can see I was asking advice when setting up the Trust Fund and Will Trust.

Mumum

Thank you ColdIron

I’m a little nervous with the “expected profit” side of things with the Sharia account and whether there is a real risk of interest not being paid or not? You’re right it’s 1.8% for one year, my mistake. Still the highest one year fixed bond that I can see, however.

Thank you for the list of pitfalls however, very useful. I don’t intend on using the money, I work part-time too and am sensible with budgeting and if I’m ever in dire need I wouldn’t use money marked for my son’s future anyway. My son, incidentally, is 13 yrs.

ColdIron

Mumum wrote: »

I’m a little nervous with the “expected profit” side of things with the Sharia account and whether there is a real risk of interest not being paid or not?

It's a very small concern. I know of no banks that have failed to pay the stated return to date and many (all?) give you a get out. From the BLME site:

• If we change the expected profit rate we will advise you before you proceed with the deposit or give you the opportunity to exit your deposit.

I have a couple of them and sleep just fine. Don't forget they are covered by the FSCS so are no less safe than any high street bank in the case of failure

Mumum

It appears BLME do not accept purchases from Trust Accounts, only individuals etc. I’ll keep looking but hope this isn’t usual for bonds.

eskbanker

ColdIron wrote: »

It's a very small concern. I know of no banks that have failed to pay the stated return to date

Al Rayan didn't meet the expected return back in 2008 (but the whole financial world was very different back then!): https://forums.moneysavingexpert.com/discussion/comment/76267662#Comment_76267662

DrSyn

1. There are many fake websites, try checking websites on the following
two to to begin with:-

https://www.scamdoc.com/

https://www.scamadviser.com/


2. When looking to see what interest rates you can expect, I suggests these two as being what you look at:-

https://www.moneysavingexpert.com/savings/

https://www.thisismoney.co.uk/money/article-1583859/Best-savings-rates-General-savings-Internet-branch.html


3. You should read the following:-

LOW RISK SAVINGS BONDS: are regulated investments.
You get them from either:-
(a) NS&I, which is a loan to the UK goverment.
b) Bank/Building Society covered by the FSCS protection (at present up to £85K).

When savings products cannot repay you your money. The FSCS will repay you (up to £85K)

SAVINGS: Money is in a safe place & not at risk. You expect to at least take out what you put in.
Money need within 5 years should be kept in a savings account.

OTHER BONDS: are unregulated investments, where there is the potential loss of all your money.
Somewhere there should be a warning about this risk to your money.

They are INVESTMENTS (not savings).

INVESTING: Putting your money at risk where there is the potential loss of all your money. You hope to take out more than you put in, but this is not guaranteed.

Think of investing for at least 10 years at least.

Investments are not covered by the FSCS protection.

Bond Scams:- Occur in unregulated investments.

4. If you ever think of putting the money into shares, I strongly suggest returning to this website site and see what others think before investing.

Mumum

Fantastic, thank you Dr Syn :money:

jimjames

DrSyn wrote: »

INVESTING: Putting your money at risk where there is the potential loss of all your money. You hope to take out more than you put in, but this is not guaranteed.

Think of investing for at least 10 years at least.

Investments are not covered by the FSCS protection.

That's not actually correct. Regulated investments are covered by FSCS but not against investment performance. It's also technically true that you could lose all your investment but if you've invested in a world index tracker then if that drops to zero the value of your investment would probably not be highest on your mind.