5 Year @ 2.25% per annum

unkle

For further info Unity Mutual is part of The Oddfellows Friendly Society. I know family members who have invested in the past and all has been fine. I can't see anything there to worry about, but up to the individual.

https://www.oddfellows.co.uk

unkle

*as to how they achieve the 2.25%, my understanding is as follows;

A sum of monies was borrowed from the Oddfellows branches and invested in a number of fixed funds paying on average 2.75%. The branches are paid 2% for their loan and as and when the public invest that money Unity pays back the branches loans. So Central unity are making a turn of between 0.75% and 0.5% on any investments made. That is how they fund it and profit.  

dunstonh

Having given it the read over it is effectively a single premium endowment policy except it can be held in the ISA wrapper.    Some of you may remember the insurance ISA and that is similar to what this is based on.

LHW99

It used to be said don't mix insurance and investment - neither will be done well.

NottinghamKnight

Fundamentally a low return product with potential penalties for early withdrawal, some risk of capital loss. Little to recommend it.

unkle

NottinghamKnight said:

Fundamentally a low return product with potential penalties for early withdrawal, some risk of capital loss. Little to recommend it.

You keep taking about some risk of capital loss, but haven't shown that, the product does not state that your capital is at risk.

As for penalties for early withdrawal, what 5 year product doesn't!

drphila

unkle said:

You keep taking about some risk of capital loss, but haven't shown that, the product does not state that your capital is at risk.

As for penalties for early withdrawal, what 5 year product doesn't!

More than that, 5 yr non-ISA products invariably don't allow any withdrawals, penalty or not.

Still haven't convinced myself there's not a catch, but for the ISA version, as a taxpayer who is well above the PSA, the effective interest rate (c. 2.8%) is extremely attractive.

unkle

I really don't believe there is a catch.

grumiofoundation

How are they able to offer 50% more 'interest' than the best 5 year fixed savings account if it offers the same capital protection?

The fact you open as a Stocks and Shares ISA alone implies it does not have the same protection as a savings account (and as numerous posters have explained it is an insurance product not a savings product).

Malthusian

Me neither. This is the first time I've encountered a (non-NS&I) "guaranteed growth bond" in the wild, i.e. a long term insurance product which works like a fixed-term deposit, but my understanding is that they are a thing. If they're not it's the weirdest and most low-key scam ever.

The catch is the inherent unattractiveness of getting only 2.25% for funds you can afford to lock up for five years. (And most people who can lock up money for five years can in reality invest it for longer, nobody has a spending need that will arise in exactly five years' time and cost exactly £X.)

drphila said:

More than that, 5 yr non-ISA products invariably don't allow any withdrawals, penalty or not.

Still haven't convinced myself there's not a catch, but for the ISA version, as a taxpayer, the effective interest rate (c. 2.8%) is extremely attractive.

The effective interest rate is 2.5% unless you are a taxpayer with interest exceeding the personal savings allowance, which is very different from "taxpayer". (PSA is £1,000pa for a basic rate tax-payer, so if you are a BRT and your average interest on your non-ISA cash is 1%, you need non-ISA cash of £100,000 to start paying tax on interest, in the absence of other interest income.)

Since April 2016 it is no longer as simple as "2.5% of tax-free interest = equivalent of 3.1% of taxable interest for a basic rate taxpayer". (Not sure where 2.8% comes from and happy to be corrected.)