Guaranteed Investment Bonds

moneylover

Is this the kind of investment that can close early or will it be available right up to April 7th? Presumably you get some sort of standard rate of interest if you were to put your money in during the early period of the offer?

dunstonh

moneylover wrote: »

Is this the kind of investment that can close early or will it be available right up to April 7th? Presumably you get some sort of standard rate of interest if you were to put your money in during the early period of the offer?

There is always a risk of early withdrawal of product if subscriptions exceed a certain amount. They will pay 3% interest according to the flyer from receipt of cheque until investment date.

Mikeyorks

dunstonh wrote: »

There is always a risk of early withdrawal of product if subscriptions exceed a certain amount.

On that aspect .. their earlier brochures for similar products indicate they can be ISA wrapped. Which means the 7th April close ... allied to any subscription quota ... makes it potentially a bit tense?

From your wide experience (nice glass of wine with your Sun tea .. and feeling relaxed and benevolent ?) ... will they be likely to accept up-front application / funds for an 08-09 ISA? Otherwise their timing's a trifle odd?

dunstonh

will they be likely to accept up-front application / funds for an 08-09 ISA? Otherwise their timing's a trifle odd?

Yes, I believe they have a dual application to allow both sides of the tax year (or either) and as long as the forms are in they will accept.

I've not put it to the test but that is what normally happens.

Careful_with_that_Axe

I wish I understood more about all this and all the terminology you're using. Shall have to head off and find short course on understanding anything other than basic finance!

Mikeyorks

dunstonh wrote: »

I've not put it to the test but that is what normally happens.

Excellent, thank you. That's exactly the response I hoped for.

You may now go back and finish the rest of the bottle!

munk

There was a good article in moneywise magazine this month about structured investment products like guaranteed investment bonds:

http://www.moneywise.co.uk/grow-money/investing/article/2008/01/28/stockmarket-returns-without-the-risk

Unfortunately there doesn't seem to be the list of compared products in the website article that was in the actual hard copy magazine. The list they have of structured products in the mag are:

ARC Stepped kick out plan (kick out pays bonus rate at end of each 12 months if both ftse and nikkei are up)
ARC Bull & Bear tracker (offers 100% of rise in ftse100 or 1% for every 1% index is down up to 40% over the term of 6yrs)
Barclays FTSE super tracker (offers five times rise in ftse up to cap of 65%, 5yrs, 50% protection)

There are a few others which are fairly similar but slightly different, the point of the article is that there are structured plans out there to suit just about any requirement that you have.

My experience of thse structured products has been bad (scot widows simple equity bond similar to that described in OP), but reading this article it seems there are a huge number of different products out there for just about any kind of index you want to track and any kind of risk you want to take.

End of day, buyer beware, some of these are incredibly complicated products and the only true guarantee is that the financial institutions laying these products on will make back more than they pay out.

cepheus

My understanding is that some of these institutions use a combination of derivatives (buying and writing call and put options) to meet the obligations of the product. However, as far as I know there are no long term derivatives available to the public which can fully replicate some. It would be interesting to work out if the product mentioned could be replicated using available instruments, to examine if it is genuinely good value.

Wurz

So glad I scrolled through and found this post! Yes, Wurz has got his dosh back from Scottish Widows and has been looking at various fixed bonds etc.

The IFA who initially tried to help save the slide in value of my previous 4 year old bond just called to say that Norwich Union are bringing out a "guaranteed bond" where if all else fails you will get your original investment back at the end of a five year term. He went on to say that all the Bond companies will be bringing something like this on to the market as so many people have burnt their fingers as I did.

Judging by comments above, this Norwich Union GIB may not be such a good product after all. Anyone got views?

Another one is Bradford & Bingley. They are offering a 50/50 split with 50% of your money getting 8.2% on a fixed one year bond, but with the other 50% tied up in a five year bond with Legal & General. Again, anyone know about this one?

dunstonh

Judging by comments above, this Norwich Union GIB may not be such a good product after all. Anyone got views?

NU launched their Guaranteed fund before Christmas. I think it was November. It certainly is an option but the guarantee only kicks in on maturity. In the interim years it will fluctuate in value.

Another one is Bradford & Bingley. They are offering a 50/50 split with 50% of your money getting 8.2% on a fixed one year bond, but with the other 50% tied up in a five year bond with Legal & General. Again, anyone know about this one?

Complete rubbish. They are using part of the commission on the really naff L&G product to cross subsidise the interest on the savings account.