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Bond to the rescue for hard-hit savers?

AS savers continue to be hammered with pathetic interest rates, many are being tempted to dabble in other investments like retail bonds.

S savers continue to be hammered with pathetic interest rates, many are being tempted to dabble in other investments like retail bonds.

Andrew Hagger from Moneycomms. co.uk says: "With traditional bank and building society savings accounts offering such poor returns over the last few years it's no surprise that, more than ever, consumers are looking at Andrew Hagger from Moneycomms. co.uk says: "With traditional bank and building society savings accounts offering such poor returns over the last few years it's no surprise that, more than ever, consumers are looking at different options to try to earn more interest.

different options to try to earn more interest.

"Although some of the headline rates on offer look very tempting, it's vital people understand the possible risks of any investment before handing over their hard-earned nest egg. "Unfortunately, it's often the deals offering higher interest returns that carry a greater risk. I'm not saying that people shouldn't invest in these less traditional schemes, but it's "Although some of the headline rates on offer look very tempting, it's vital people understand the possible risks of any investment before handing over their hard-earned nest egg. "Unfortunately, it's often the deals offering higher interest returns that carry a greater risk. I'm not saying that people shouldn't invest in these less traditional schemes, but it's important that they appreciate the potential pitfalls before making a decision."

important that they appreciate the potential pitfalls before making a decision."

The basic rule when looking at savings and investments is to spread your risk, not to put all your eggs into one basket. You need three levels of savings, instant access in case of an emergency, medium term and longer term for the chance of a better return.

The basic rule when looking at savings and investments is to spread your risk, not to put all your eggs into one basket. You need three levels of savings, instant access in case of an emergency, medium term and longer term for the chance of a better return.

Here we bring you the basics on Here we bring you the basics on the different types of bonds available: the different types of bonds available: FIXED RATE SAVING BONDS FIXED RATE SAVING BONDS THESE are longer term savings accounts available from banks and building societies, where you agree to lock your cash away for the term of the bond.

THESE are longer term savings accounts available from banks and building societies, where you agree to lock your cash away for the term of the bond.

Minimum investment This depends on the bank or building society concerned, some can be opened with just PS1, whereas others may require PS5,000, PS10,000 or, in some cases, PS25,000.

Minimum investment This depends on the bank or building society concerned, some can be opened with just PS1, whereas others may require PS5,000, PS10,000 or, in some cases, PS25,000.

Maximum investment Again this will differ, some accounts have a limit of PS10,000 but usually the sums are much higher than this, often up to PS1million or more.

Maximum investment Again this will differ, some accounts have a limit of PS10,000 but usually the sums are much higher than this, often up to PS1million or more.

Can I access my money? You agree to leave your money locked away for the period of the bond. This can be from six months to seven years - usually the longer the term of the bond, the higher the interest rate. If you want to get access to your money before the bond matures, you'll find that some providers don't permit early access while others will charge you a stiff interest penalty to get your hands on your money.

Can I access my money? You agree to leave your money locked away for the period of the bond. This can be from six months to seven years - usually the longer the term of the bond, the higher the interest rate. If you want to get access to your money before the bond matures, you'll find that some providers don't permit early access while others will charge you a stiff interest penalty to get your hands on your money.

What return will I get? Interest rates vary so do your research.

What return will I get? Interest rates vary so do your research.

How safe is my money? How safe is my money? Money held with the vast majority of banks and building societies in the UK is protected under the Financial Services Compensation Scheme (FSCS). This protection means that if a bank was to go bust, your savings up to a maximum PS85,000 will be returned to you (for joint accounts it is double the amount, i.e. PS170,000). Any sums over and above these limits are not protected by the FSCS guarantee.

Money held with the vast majority of banks and building societies in the UK is protected under the Financial Services Compensation Scheme (FSCS). This protection means that if a bank was to go bust, your savings up to a maximum PS85,000 will be returned to you (for joint accounts it is double the amount, i.e. PS170,000). Any sums over and above these limits are not protected by the FSCS guarantee.

CORPORATE BOND FUNDS CORPORATE BOND FUNDS THESE are professionally managed funds which buys a large number of individual bonds so that you don't encounter the same risks as with retail corporate bonds. These can be bought through your independent financial adviser or online through someone like FundExpert.co.uk.

Minimum investment: PS1,000.

someone like FundExpert.co.uk. Minimum investment: PS1,000. Maximum investment: No maximum.

Maximum investment: No maximum.

Can I access my money? You can sell at any time, though you should remember the capital values can go down as well as up.

Can I access my money? You can sell at any time, though you should remember the capital values can go down as well as up.

What return will I get? The interest rate on these funds varies from 3% to 6%, plus there is the possibility of a capital gain because of the professional management.

What return will I get? The interest rate on these funds varies from 3% to 6%, plus there is the possibility of a capital gain because of the professional management.

How safe is my money? How safe is my money? INVESTMENTS into bond funds (unit trusts) are covered under the FSCS.

INVESTMENTS into bond funds (unit trusts) are covered under the FSCS.

This will pay out where investors lose money because of bad or misleading advice, negligent management of investments, misrepresentation or fraud, and if the firm concerned has gone out of business and can't return your This will pay out where investors lose money because of bad or misleading advice, negligent management of investments, misrepresentation or fraud, and if the firm concerned has gone out of business and can't return your investments or money owed.

investments or money owed.

The amount is up to PS50,000 per person per firm. The FSCS does not pay out for loss of money simply due to poor performance.

The amount is up to PS50,000 per person per firm. The FSCS does not pay out for loss of money simply due to poor performance.

PREMIUM BONDS PREMIUM BONDS THESE are a fun yet serious investment available to anyone over 16 years of age. Your bonds are THESE are a fun yet serious investment available to anyone over 16 years of age. Your bonds are entered into a monthly draw where it's possible to win cash prizes from PS25 to PS1m.

entered into a monthly draw where it's possible to win cash prizes from PS25 to PS1m.

Minumum investment: PS100 (100 PS1 units).

Minumum investment: PS100 (100 PS1 units).

Maximum investment: PS30,000. Can I access my money? You can withdraw your money at any time, it usually takes around five to seven days.

Maximum investment: PS30,000. Can I access my money? You can withdraw your money at any time, it usually takes around five to seven days.

What return will I get? There is no guaranteed return or interest paid but each month all of your PS1 bond units are put into a draw with the chance to win cash. How safe is my money? There is no guaranteed return or interest paid but each month all of your PS1 bond units are put into a draw with the chance to win cash. How safe is my money? IT is 100% safe as Premium Bonds are operated by National Savings and Investments which is backed by the Treasury. Inflation can reduce the true value of your money over time. For more information go to nsandi.com/savings-premium-bonds RETAIL CORPORATE BONDS RETAIL CORPORATE BONDS IF you invest your money by purchasing some of these bonds, you'll receive interest payments at a pre-agreed rate either annually or every six months.

IF you invest your money by purchasing some of these bonds, you'll receive interest payments at a pre-agreed rate either annually or every six months.

You SHOULD receive your capital back when the bond matures - typically between three and seven years later - but there's no guarantee you'll get all your investment back. If the company that issued the bond goes bust, you will get little or nothing back. These retail bonds are listed on the London Stock Exchange. Similar bonds are known as "mini bonds" such as those issued in recent months by John Lewis - these are not available to trade on the stock market and you have to wait until the bond matures to get your money back.

You SHOULD receive your capital back when the bond matures - typically between three and seven years later - but there's no guarantee you'll get all your investment back. If the company that issued the bond goes bust, you will get little or nothing back. These retail bonds are listed on the London Stock Exchange. Similar bonds are known as "mini bonds" such as those issued in recent months by John Lewis - these are not available to trade on the stock market and you have to wait until the bond matures to get your money back.

Minimum investment Usually between PS500 and PS2,000. Maximum investment: No maximum.

Minimum investment Usually between PS500 and PS2,000. Maximum investment: No maximum.

Can I access my money? It may be possible to sell your stake with some bonds before they mature. What return will I get? The rate of return varies with each issue and it is not uncommon to see rates of between 5% and 7% being offered.

The rate of return varies with each issue and it is not uncommon to see rates of between 5% and 7% being offered.

How safe is my money? Unlike bank savings bonds, retail corporate bonds are not covered by the Financial Services Compensations Scheme (FSCS) and if for some reason the company issuing the bond went bust, then you could lose some or all of the money you invested.

How safe is my money? Unlike bank savings bonds, retail corporate bonds are not covered by the Financial Services Compensations Scheme (FSCS) and if for some reason the company issuing the bond went bust, then you could lose some or all of the money you invested.
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Title Annotation:Features
Publication:South Wales Echo (Cardiff, Wales)
Date:Dec 30, 2013
Words:1922
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