Abbey Guaranteed Growth PAln 10 (5.5 Year) - A bad investment?

[Deleted User]

Damn! You're absolutely right about CGT. I missread the information on the IR site.

And don't worry - It's exactly why I posted here - to try and understand exactly what the position is now, and make sure we take the right action.

Cashing in *might* be an option, but if we cash it in are we still liable for the CGT that would have been due at maturity? It's possible that they could see this as giving an asset away in which case I think you get hit with the bill anyway.

We've already been down the deed of variation route before to avoid inheritance tax and it was quite cheap and painless so that wouldn't be a problem. And that would be a way for both my brother and I to avoid CGT. So good tip - I'll look into it.

I'll also find out if I could wrap more of it in this year's ISA allowance. Say for example my partner and I can transfer another £7,000 of the fund into our ISA allowance each year that would solve the problem. Although it would mean we couldn't have cash ISA's too.

If we can deal with the problem of CGT with mum's money then I'm content with the return (and if all else fails the dead of variation should be a cheap and easy solution). But if we have to pay a lot of CGT on what we inherit from mum it's not looking so good. A good chunk of mum's money was wrapped in ISA's protecting it from CGT, but they would have been terminated when she died.

I really appreciate all of this.

As for my request for the list of quality guaranteed investment products - it wasn't so much that I was looking to invest in them now but rather I was making the point that if the people that offered these products made them more suitable for the typical customer (i.e. well advertised and easy for busy people that frequently have more pressing things to worry about to buy into) we wouldn't be at the mercy of the Evil banks and building societies Surely they want people to invest with them so why not market their wares and let us select for ourselves what we want?

dunstonh

By 'whole of market distribution channels' what exactly do you mean?

Does Joe and Jane average have direct access to these 'whole of market distribution channels'?

Typically through IFAs or discount brokers.

And why only advertise in the financial press? How many people read that?

Most of them are not geared up to retail direct to public as they get enough coming in from multi-ties and IFA. If they go retailing direct they have to have increased levels of compliance and regulation and the cost of all that can easily exceed what little they would gain. IFAs can do the advertising if they wish as they then take on the liability.

Is there a list of these products on this website somewhere? Or is there some catch....such as "you need to use an IFA to find out about them"?

I suppose there is a catch then as many are IFA only. However, that doesnt mean you need to use an IFA for advice. You can transact "execution only" if you want and thats what discount IFAs do. Quite a lot of products are IFA only. IFAs account for the majority of transactions and many of the providers dont like to bite the hand that feeds them by offering direct. Some that do have direct offerings are often more expensive or cut down versions of the IFA product.

[Deleted User]

And I suspect that this is the very reason why so many people prefer to stick with Bank and Building Society products even when they know that there are almost certainly better alternatives out there.

Banks and Building Societies advertise their products well. And those products are reviewed by the media so we can quite easily get free expert opinions from a variety of sources. Without having to put in much effort we can easily see what Banks are offering products that seem appealing to us and we can easily get comparisons of products from websites like this. Now sure, often we don't bother to think and I'm sure very many of us at times loose lots of money because we don't make the time to manage our finances. But if and when we do choose to take things in hand we want to feel that we're in control and understand what we're buying into.

The situation you describe is simply not satisfactory from my point of view as a consumer. If I'm tempted by the promise of these superior products that you refer to I have to go to an IFA who has special information that I'm not privy to. I have no choice but to trust him as he's playing all his cards close to his chest. I can't look up reviews of the products he's proposing for me because they're either secret or not packaged in such a way that they can be reviewed by the media. Lets just imagine that there's a Bank or Building society product out there that really is best for me. Would the IFA be able to sell it to me - my guess is no. And if he's on commission he's hardly likely to send me to my local Bank Manager to invest my money. If he's not on commission then I have to pay him whether I decide to take his advice or not. And chances are I'll be paying him to spend a great deal of time trying to convince me that I want to take risks with my money when really I know for certain that I don't Now it's all very well saying that these people have qualifications and governing bodies. Doctors are highly qualified and regulated yet I can assure you that on more than one occasion I've found a correct diagnosis and treatment via google after a doctor has got it badly wrong. This is simply because I care more about my family's interests than anyone else. Not because I'm smarter or more knowledgeable than the doctor.

Call me a cynic, but I'm highly suspicious of anything that is kept secret from the general public and can only be found out about by paying a certain type of person to tell you about it. I'd feel a whole lot happier if these things were widely publicized. Then we could research things for ourselves, choose what we wanted and, if necessary, employ a IFA to 'approve' our plans and work out the details. That way we're meeting the IFA on more level ground. And I can make better use of the expertise that I'm paying for as I've done all my homework up front. Now I realise that in many cases the whole benefit of using an IFA is that he can put together really complex stuff that can't be easily understood by the layperson. But I suspect that people that take advantage of that will often have a good understanding of things themselves and won't be acting on blind faith.

So, having said all that, who else other than Banks or Building Societies have savings and investment products that are well packaged, publicised and reviewed? Products that us amatures can sit back and learn about, compare and choose?

dunstonh

And I suspect that this is the very reason why so many people prefer to stick with Bank and Building Society products even when they know that there are almost certainly better alternatives out there.

Yet figures show that IFAs handle the majority of transactions. Banks have been growing their market share. Mainly at the expense of the old insurance company salesforces that closed down.

The situation you describe is simply not satisfactory from my point of view as a consumer. If I'm tempted by the promise of these superior products that you refer to I have to go to an IFA who has special information that I'm not privy to. I have no choice but to trust him as he's playing all his cards close to his chest.

The research data and product information is available and supplied.

I can't look up reviews of the products he's proposing for me because they're either secret or not packaged in such a way that they can be reviewed by the media.

The information is available. Just because they are not actively marketed doesnt mean you dont get information. You get identical information as to what is provided by the banks. In fact you get more if you read the research reports which detail the options.

Lets just imagine that there's a Bank or Building society product out there that really is best for me. Would the IFA be able to sell it to me - my guess is no.

You guess wrong. Most of the banks products are available through IFAs. Indeed, many of the banks products are cut down versions of the IFA product or more expensive versions of the IFA product.

And if he's on commission he's hardly likely to send me to my local Bank Manager to invest my money.

That would be an awful recommendation. Sending someone to a bank for investment advice when most of the bank salesforce dont have the remit to give proper portfolio recommendations, are the most expensive distribution channels and typically the worst product versions.

If he's not on commission then I have to pay him whether I decide to take his advice or not. And chances are I'll be paying him to spend a great deal of time trying to convince me that I want to take risks with my money when really I know for certain that I don't

There is virtually no nil risk option out there. Everything carries a risk to some degree. Cash carries risks as well. Its better to make an informed choice rather than be shoehorned into a product that you think is best when it clearly isnt.

Your Abbey adviser got 3% commission for those product recommendations. The IFA recommendations would have seen NS&I certs used probably for 30k of the money and thats a nil commission payer. IFAs are the biggest referrers to NS&I despite them not paying a penny.

Banks and Building Societies advertise their products well.

Really? You tend not to see many adverts for specific products from the banks. They tend to promote a brand or a general product area without giving any specifics. Abbey promote the super ISA as they need the money and most novice investors are not knowledgeable enough to realise what a rubbish product it is until the facts are pointed out to them.

jem16

Deleted_User wrote: »

And I suspect that this is the very reason why so many people prefer to stick with Bank and Building Society products even when they know that there are almost certainly better alternatives out there.

Most people go to a Bank or Building Society simply because it's on the high street and easily accessible.

Banks and Building Societies advertise their products well. And those products are reviewed by the media so we can quite easily get free expert opinions from a variety of sources. Without having to put in much effort we can easily see what Banks are offering products that seem appealing to us and we can easily get comparisons of products from websites like this. Now sure, often we don't bother to think and I'm sure very many of us at times loose lots of money because we don't make the time to manage our finances. But if and when we do choose to take things in hand we want to feel that we're in control and understand what we're buying into.

I was out to dinner on Friday night with a friend who was absolutely fuming with Abbey. She had invested in one of their Guaranteed investment plans 5 years ago and it has now matured. Apparently it has gone way down and made very little over the 5 years. To get her money out Abbey have told her she has to open a current account with them to pay her money into. She simply wants her money out as she is just going to spend it all - no point in investing she says! As a result of this bad experience she has also gone to the Nationwide and told them she is taking her money out of a similar product.

Niw she knew there was a guarantee which was why she chose this product. However in the end she is fuming because it made virtually nothing - less than if she had stuck it in a savings account. Of course what happened was that all her money would have been in just one fund so no protection when things went bad.

The situation you describe is simply not satisfactory from my point of view as a consumer. If I'm tempted by the promise of these superior products that you refer to I have to go to an IFA who has special information that I'm not privy to. I have no choice but to trust him as he's playing all his cards close to his chest.

Have you actually had any experience of an IFA or are you just telling us what you think may happen?

[Deleted User]

I don't have any desire to debate the merits of IFA's. I'm sure they do a wonderful job for very many people. I'm simply pointing out facts that might save you wasting time giving me advise that is simply not relevant to me. To reiterate:

a) I wouldn't consider investing money unless there's a guaranteed minimum return that will at least match what I can reasonably expect to get by investing in cash ISA's and high interest savings accounts. The fact that the GGP doesn't means that I wouldn't consider it under normal circumstances. However, it wasn't taken out under normal circumstances. My interest in discussing it in this thread is assessing the situation and damage limitation. (So information re working out equivalent interest, CGT and so on is extremely helpful and will no doubt lead to me saving myself money). If there's another investment/savings account available that gives a better guaranteed return - one high enough to make it worth my while cutting my losses on this one and transferring my money then I'd love to hear about it.

b) I wouldn't go to an IFA (or anyone else that was essentially going to sell me something) unless I already had a very clear idea of what product I wanted and had already researched the implications, pros and cons. Hence my questions about where I can find information about products available only through IFA's that match my requirement for cast iron guarantees. If I can't find that information then I'm limited to Banks, Building Societies and websites like this. I can live with that.

c) As far as my other savings are concerned I intend to simply use the advice given on this website re cash ISA's, regular savings accounts and high paying savings accounts. UNLESS I get wind of some kind of investment that GUARANTEES (not simply promises) me at least what I'd get using this approach. This is the key point that some are missing - I have no inclination to invest UNLESS something crops up that's guaranteed to beat what I can get through savings. That might change if a time comes when interest on savings isn't staying ahead of inflation.

So please...whatever you think of my decisions regarding risk and who I trust please respect them and let me spend my time on here getting the information I need to sort out my current situation and hopefully save some money!!!!! I get that you think I'm naive, stupid, whatever....I can live with your low opinion of my decision making process.

So, any experts on CGT out there? Or what about ISA's - is it possible to use your annual ISA allowance to 'wrap' parts of an existing investment?

RayWolfe

For someone who knows all the answers, you seem to ask a lot of questions.
..... and then reject the help you are given!
Try listening instead of bickering and you may learn more.

[Deleted User]

Actually I've been given some incredibly useful and relevant information on this thread that I think may well lead to a big saving in money. Rest assured that good, relevant advice is very appreciated and certainly NOT rejected!

But I'm 100% with you when it comes to bickering - completely unproductive. At the end of the day there's no need to read or respond to posts that aren't of interest to you. Better to ignore stuff that's not helpful to you than drag useful threads off topic. :T

So getting away from the unproductive bickering and back to the topic in hand....

Any experts on CGT and how it relates to investments out there? What happens if you cash in an investment when someone dies - does the tax man value it at maturity value and hit you with a bill anyway?

And what about ISA's - is it possible to use your annual ISA allowance to 'wrap' parts of an existing investment in order to protect it from CGT?

jem16

Deleted_User wrote: »

Actually I've been given some incredibly useful and relevant information on this thread that I think may well lead to a big saving in money. Rest assured that good, relevant advice is very appreciated and certainly NOT rejected!

You asked for advice as to whether this investment was bad. You have been told that it is bad compared to other similar investments. That advice has been relevant and you have rejected it as far as I can see.

Any experts on CGT and how it relates to investments out there? What happens if you cash in an investment when someone dies - does the tax man value it at maturity value and hit you with a bill anyway?

Value at time of encashment would be looked at. If it's higher than initial investment then CGT may be due if it's more than CGT allowance. If it's less then no CGT due.

And what about ISA's - is it possible to use your annual ISA allowance to 'wrap' parts of an existing investment in order to protect it from CGT?

Yes it is by using Bed & ISA. To do that though you have to switch from outside the ISA to inside the ISA by selling and reinvesting. Doubt it would be any good for you with your circumstances.

EdInvestor

dunstonh wrote: »

That 25% equates to 4.1% p.a. so that is a pretty poor rate.You are not being paid dividends so are losing around 3% p.a. That effectively is an implicit charge of 3% p.a.

Actually the FTSE100 is currently yielding - wait for it - 4.1%. So the bank is just giving you what your investment is earning anyway.

Io if the OP had bought the shares directly, he would get the 25% return as divis tax free (even outside an ISA) because although share prices are volatile, divis are much more stable (better than cash interest) and are presently on a rising trend.

Plus ALL the capital growth would be his.

Perhaps he can now see how much he is paying for the guarantee.