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

EdInvestor

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.Banks and Building Societies advertise their products well.

The minority of investors who do this are usually just ignorant or lazy.The most important aspect of the ignorance - as indeed demonstrated by the OP - is that the customer doesn't know that the so-called 'financial advisor' in the branch can only recommend products sold by his own bank.

It would be like buying every single item of food and cooking ingredient from Marks and Spencer. Although there may be some quality aspects, the experience will be expensive, and your choice in many areas will be very limited indeed.

And those products are reviewed by the media so we can quite easily get free expert opinions from a variety of sources.

This is really limited only to savings rates.Bank's investment products are rarely reviewed by anyone with any skill.

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.

This is all incorrect.There is plenty of information available - it's just that you don't read the investment pages of the press or appropriate websites, because you claim to be risk averse -and yet you invest in risk-based products such as pensions and GEBs.Why?

If you are going to use risk based investments you should either DYOR, via sites like these which can guide you to the info you need and offer useful opinion about your choices, or instruct an IFA.Not a bank salesman.

Of course it always helps to listen to the information and opinions you receive, as well.:)

debbie42

Deleted_User wrote: »

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.

It isn't kept "secret": I could learn the information necessary to qualify as IFAs if I had the time and/or inclination. I don't: any more than I want to learn how to become a plumber and install a boiler. I'm quite happy to pay someone to come and do that for me, whilst I can do simple things like change a radiator valve or cistern. Why is that any different to accepting that an IFA knows more about the subject than you can ever do (unless you choose to go that way).

Also, what makes you think a bank advisor is generally more reliable or transparent than an IFA?

DRS1

Plus ALL the capital growth would be his.

Ed I am sure you are right to ignore all the doom and gloom threads on here about the stock market crashing but at the end of October 2007 the FTSE 100 was just over 6700, now it is just over 5600. That is precisely the sort of "capital growth" the OP was seeking to avoid. Yes share values can go up as well as down but not everyone wants to take the risk. Many people are savers rather then investors. It seems to me that a GEB like this one, where you are guaranteed at least some positive return and may get more if things go well, can be a reasonable way for such people to dip a toe in the makets without jumping in at the deep end.

[Deleted User]

DRS1 - Thanks for your advise and brain-power over this. It's always so much easier to communicate with someone that can get their head around the idea that I don't want to gamble with investments! It's frustrating having to constantly justify your tollerance to risk when really you just want answers to specific questions.

You've been a big help and given me plenty to research. I'm not sure of all the answers yet, but you've armed me with all the right questions. I think there's a very good chance that your input regarding the CGT will allow us to take action that could save us quite a lot of money and make the guaranteed return on this GGP acceptable - the Deed of Variation is definately a possibility but hopefully there will be other, easier options. I'll let you know how it all pans out. :beer:

dunstonh

DRS1 - Thanks for your advise and brain-power over this. It's always so much easier to communicate with someone that can get their head around the idea that I don't want to gamble with investments! It's frustrating having to constantly justify your tollerance to risk when really you just want answers to specific questions.

You are not getting your risk profile questioned. You are getting your judgement questioned on what is best. By buying the GEB from Abbey you took on a risk. The capital may be secure but the return has a very good change of not keeping up with RPI meaning you are losing money in real terms. Your pensions are invested above your risk profile. You have chosen some cash and some equity. You obviously chose to invest in the equity funds as you didnt use an IFA. You picked two extremes; cash and stockmarket. Nothing in between.

Risk is diluted over timescale so it is sensible to take on some risk. However, it is the level of risk you take that matters. Taking on some risk doesnt mean going gung ho into equities and taking no risk doenst mean going fully into cash (as that is a risk in other ways). Its about understanding risk vs reward and them making a judgement call based on that understanding. If after understanding the various options you still want guarantees on 100% of the money then you go with it in the pensions, savings and investments. However, that will mean using products and options that are not available to your Abbey sales rep. It is also important you understand the cost of the guarantees you are taking.

It is possible to more or less build your own GEB where you get all the returns and chances of losing money are very very low. Too low to likely ever happen. In other words a justifiable risk. You just seem to want to ignore every other option.

None of us here care whether you are low or high risk or whatever. However, we do question your blind faith in a sales rep from a bank with an awful reputation and poor quality product range and your complete elimination of risk based products when you have shown you have taken risks. Risks that we are not sure you understand.

jem16

Deleted_User wrote: »

DRS1 - Thanks for your advise and brain-power over this. It's always so much easier to communicate with someone that can get their head around the idea that I don't want to gamble with investments! It's frustrating having to constantly justify your tollerance to risk when really you just want answers to specific questions.

Nobody here is trying to make you gamble with investments. We are just trying to help you understand the risk you are already taking albeit unknowingly. There are better options.

I have answered your questions on CGT and ISA wraps but you have ignored them too.

EdInvestor

DRS1 wrote: »

Ed I am sure you are right to ignore all the doom and gloom threads on here about the stock market crashing but at the end of October 2007 the FTSE 100 was just over 6700, now it is just over 5600. That is precisely the sort of "capital growth" the OP was seeking to avoid.

All investors should know or be told that investments are over a 5 year period - indeed the OP's GEB is over 5.5 years (and guarantees his capital anyway)So what exactly is he getting antsy about?

Yes share values can go up as well as down but not everyone wants to take the risk. Many people are savers rather then investors.

So let them save then.

It seems to me that a GEB like this one, where you are guaranteed at least some positive return and may get more if things go well, can be a reasonable way for such people to dip a toe in the makets without jumping in at the deep end.

But what happens is

a) they get antsy midway through because the market plunges for a while, even though their capital is guaranteed

b)at the end up with a crap return, they complain they would have done better in a savings account.Well of course they would.

It's amazing how many people want their money to be safe but also like a punt - a pure gamble - but are too lazy to work out how to invest properly while reducing risk. Of course the banks just rip them off as a result.

[Deleted User]

All investors should know or be told that investments are over a 5 year period - indeed the OP's GEB is over 5.5 years (and guarantees his capital anyway)So what exactly is he getting antsy about?

Ed - the trouble is you're listening (or reading) the confused missunderstandings of other posters that have either not been following the thread or have completely missunderstood what it's about. Most of the comments being made have no bearing on the facts.

Let me reiterate once again in the probably futile hope of putting an end to the confusion and bickering:

1. Last year my parents died tragically and slowly 8 months appart. Caring for them and dealing with their afairs fell on my shoulders and as I was at breaking point trying to care for them I decided to instruct my bank (who already had most of my parents money) to put it somewhere where there would be no risk to capital and a guaranteed return. I expected my mum to linger on for a few years so asked him to lock it away as safely as he could for a few years so I didn't have to bother about it. I was well aware of the fact that he could only sell me Abbey products. I was well aware of the fact that I would almost certainly do better if I shopped around. Given my priorities at the time I was fine with that. He tried to talk me into a higher risk investment that he was confident would give a good return but I turned him down flat. I agreed to him putting part of it into a GGP as the guaranteed return seemed to be competetive with what many savings accounts were offering - certainly better than what the Abbey had to offer at the time. It also meant that I could put an equivelent amount in a 1 year bond earning 8.1%. I didn't give a rat's a*se about the mumbo jumbo regarding what I might get if the FTSE 100 did well. I had more important things to worry about. Nor did I give a rat's a*se about whether I was getting the best possible return on the investment. The guaranteed return sounded good enough at the time - anything else was a bonus.

2. Now things have stabilised and I have time and inclination to figure out where best to put my savings (which have grown quite substantially now that I've inheritted from my parents). I stumbled across an article absolutely slating the GGP that I'd put my mum's money into so I thought I'd better find out just how bad it really is so that I could decide whether to cut my losses and pull it out or take steps to maximise the return. Hence this thread.

3. With the help of a few individuals I've been able to understand exactly how the guaranteed return compares to other savings accounts and I feel OK about it. A few posters that were actually following the thread and answering the questions I was asking guided me towards considering how Capital Gains Tax might reduce the return on the investment and they've helped me to come up with ways to avoid CGT. So those attentive people have probably saved me a LOT of money with their relevant responses and advise. And I'm extemely grateful to them.

It's as simple as that. All the bickering is just a lot of hot air about nothing.

I'm not getting 'antsy'. My feeling is that whilst I wouldn't take out a plan like this if I'd had time and inclination to really think things through, it's not too bad. There's no need for me to consider cutting my losses and cashing it in, and who knows - it's within the realms of possibility that my one 'accidental' concession to my 'no risk/no investments' rule might turn out to give me a better return than savings would have. Only time will tell. But if it does go well for me it wouldn't entice me away from savings in the future. I'd just thank my lucky stars that I got away with it

Anyway, it's all sorted now so no further advice required. A HUGE thank you to those that took the time to help me :beer:

I think I'm pretty much sorted with my question re savings (another thread), so I'll take make a sharp exit before I get anyone else all hot and bothered. :rotfl:

jem16

Deleted_User wrote: »

Ed - the trouble is you're listening (or reading) the confused missunderstandings of other posters that have either not been following the thread or have completely missunderstood what it's about.

Someone is confused and not understanding here but it sure aint me or the "others".

Most of the comments being made have no bearing on the facts.

They have. It's just not the facts you seem to want.

3. With the help of a few individuals I've been able to understand exactly how the guaranteed return compares to other savings accounts and I feel OK about it.

It's not a savings account.

It's as simple as that. All the bickering is just a lot of hot air about nothing.

People are genuinely trying to help you but you are not listening.

Your loss.

[Deleted User]

DRS1 wrote: »

Plus ALL the capital growth would be his.

Ed I am sure you are right to ignore all the doom and gloom threads on here about the stock market crashing but at the end of October 2007 the FTSE 100 was just over 6700, now it is just over 5600. That is precisely the sort of "capital growth" the OP was seeking to avoid. Yes share values can go up as well as down but not everyone wants to take the risk. Many people are savers rather then investors. It seems to me that a GEB like this one, where you are guaranteed at least some positive return and may get more if things go well, can be a reasonable way for such people to dip a toe in the makets without jumping in at the deep end.

DRS1, if you're still out there - what's your take on how this investment is looking now from the point of view of savers rather than investors? (25% over 5.5 years, plus 8.1% for one year on an equal amount)???