Investec offering 5.67% on a three year fix via the HL platform. It doesnt seem to be available on Investec's own website. Interest paid on maturity.
Missed out on this one thanks to raisin taking at least three working days to return cash from an 'easy access' account. Zopa, Investec and Atom manage it in minutes. I appreciate raisin is a broker, but still. Not too bothered as rates will likely bump up this week, but I'll be surprised if there's a better three year rate than that in the near term.
Investec offering 5.67% on a three year fix via the HL platform. It doesnt seem to be available on Investec's own website. Interest paid on maturity.
Missed out on this one thanks to raisin taking at least three working days to return cash from an 'easy access' account. Zopa, Investec and Atom manage it in minutes. I appreciate raisin is a broker, but still. Not too bothered as rates will likely bump up this week, but I'll be surprised if there's a better three year rate than that in the near term.
I agree with you. I've used it, but am not a huge fan.
On the subject of cautious investors tempted into such deals (rather than equity markets), this FT article tends to suggest that currently we are not such mugs.
I moved some holdings in US equity funds into a money market fund this weekend. It's because I took on board a string of articles showing how the S&P 500 is dominated in weighting by 6-7 companies -mainly the usual Big Tech boys - and it is they who have driven the index performance up. The other companies in the index are actually not generally doing well at all, it turns out (its a similar but different phenomenon to the FTSE100 situation, the index dominated by Big Legacy Energy, and thus not a measure of how British business more generally is doing).
I also moved some pension money from US to European funds recently to rebalance, time will tell if that was sensible. I think there's still some time before putting a bit more into bond funds makes sense.
BTW, Raisin are now offering the 3 year Investec bond at 5.67% as are HL, difference being that in the HL version the interest compounds annually even though not paid until maturity whereas the Raisin version doesn't. Suspect there may be an admin error somewhere, as it works out about £100 different at the end of the three years, and I've seen basic errors in savings apps recently. For example Zopa treated my 7 day notice deposit as a 31 day notice deposit even though it states 7 days' notice clearly in the app. Not important to me at the moment, but irritating they cant get this stuff right.
Just had an email through regarding a Deposit-based Structured Product & has the usual £85k protection. Based on the level of the FTSE in 5 years time it pays 40% (8%pa) if the FTSE is at least level with its starting point or 35% (7%pa) if the FTSE is at least 90% of its starting point. 2nd option seems very tempting - but obviously these are taxable in line with usual savings accounts, although are ISA-able so can put £20k for tax-free returns.
Just had an email through regarding a Deposit-based Structured Product & has the usual £85k protection. Based on the level of the FTSE in 5 years time it pays 40% (8%pa) if the FTSE is at least level with its starting point or 35% (7%pa) if the FTSE is at least 90% of its starting point. 2nd option seems very tempting - but obviously these are taxable in line with usual savings accounts, although are ISA-able so can put £20k for tax-free returns.
How does it work if FTSE was lower than 90%? Capital protected but no return or does it taper down from there?
Just had an email through regarding a Deposit-based Structured Product & has the usual £85k protection. Based on the level of the FTSE in 5 years time it pays 40% (8%pa) if the FTSE is at least level with its starting point or 35% (7%pa) if the FTSE is at least 90% of its starting point. 2nd option seems very tempting - but obviously these are taxable in line with usual savings accounts, although are ISA-able so can put £20k for tax-free returns.
How does it work if FTSE was lower than 90%? Capital protected but no return or does it taper down from there?
Just the return of your initial capital. No losses even if the FTSE tanks. Thats why I like the 90% version. The FTSE can lose 10% of its value & you still make a 35% return over the 5 years.
Just had an email through regarding a Deposit-based Structured Product & has the usual £85k protection. Based on the level of the FTSE in 5 years time it pays 40% (8%pa) if the FTSE is at least level with its starting point or 35% (7%pa) if the FTSE is at least 90% of its starting point. 2nd option seems very tempting - but obviously these are taxable in line with usual savings accounts, although are ISA-able so can put £20k for tax-free returns.
So you are just 'risking' not getting additional upside if the FTSE does better than 8% per annum?
Just had an email through regarding a Deposit-based Structured Product & has the usual £85k protection. Based on the level of the FTSE in 5 years time it pays 40% (8%pa) if the FTSE is at least level with its starting point or 35% (7%pa) if the FTSE is at least 90% of its starting point. 2nd option seems very tempting - but obviously these are taxable in line with usual savings accounts, although are ISA-able so can put £20k for tax-free returns.
So you are just 'risking' not getting additional upside if the FTSE does better than 8% per annum?
Yep.... thats about the long & short of it.
Obviously there are other implications such as tax (income tax in a Deposit based SP structure) compared to CGT if you invest in the FTSE directly and also the fixed time frames involved
Just thought it was worth pointing out to those trying to get a good return on their cash deposits.
Ps
Obviously this is not a solicitation to buy or a financial promotion advertisement.
Just had an email through regarding a Deposit-based Structured Product & has the usual £85k protection. Based on the level of the FTSE in 5 years time it pays 40% (8%pa) if the FTSE is at least level with its starting point or 35% (7%pa) if the FTSE is at least 90% of its starting point. 2nd option seems very tempting - but obviously these are taxable in line with usual savings accounts, although are ISA-able so can put £20k for tax-free returns.
So you are just 'risking' not getting additional upside if the FTSE does better than 8% per annum?
Yep.... thats about the long & short of it.
Obviously there are other implications such as tax (income tax in a Deposit based SP structure) compared to CGT if you invest in the FTSE directly and also the fixed time frames involved
Just thought it was worth pointing out to those trying to get a good return on their cash deposits.
Ps
Obviously this is not a solicitation to buy or a financial promotion advertisement.
I'm interested. I have been meaning to ask about "structured products" since @Rob7Lee mentioned them to me the other day when I was moaning about bonds. I'd be interested if people who know about these products in general have more comments. Also is this one based on FTSE100? If so I'd probably shy away, but I suppose there must be others based on FTSEAllWorld or similar?
Just had an email through regarding a Deposit-based Structured Product & has the usual £85k protection. Based on the level of the FTSE in 5 years time it pays 40% (8%pa) if the FTSE is at least level with its starting point or 35% (7%pa) if the FTSE is at least 90% of its starting point. 2nd option seems very tempting - but obviously these are taxable in line with usual savings accounts, although are ISA-able so can put £20k for tax-free returns.
So you are just 'risking' not getting additional upside if the FTSE does better than 8% per annum?
Yep.... thats about the long & short of it.
Obviously there are other implications such as tax (income tax in a Deposit based SP structure) compared to CGT if you invest in the FTSE directly and also the fixed time frames involved
Just thought it was worth pointing out to those trying to get a good return on their cash deposits.
Ps
Obviously this is not a solicitation to buy or a financial promotion advertisement.
Just had an email through regarding a Deposit-based Structured Product & has the usual £85k protection. Based on the level of the FTSE in 5 years time it pays 40% (8%pa) if the FTSE is at least level with its starting point or 35% (7%pa) if the FTSE is at least 90% of its starting point. 2nd option seems very tempting - but obviously these are taxable in line with usual savings accounts, although are ISA-able so can put £20k for tax-free returns.
So you are just 'risking' not getting additional upside if the FTSE does better than 8% per annum?
Yep.... thats about the long & short of it.
Obviously there are other implications such as tax (income tax in a Deposit based SP structure) compared to CGT if you invest in the FTSE directly and also the fixed time frames involved
Just thought it was worth pointing out to those trying to get a good return on their cash deposits.
Ps
Obviously this is not a solicitation to buy or a financial promotion advertisement.
I'm interested. I have been meaning to ask about "structured products" since @Rob7Lee mentioned them to me the other day when I was moaning about bonds. I'd be interested if people who know about these products in general have more comments. Also is this one based on FTSE100? If so I'd probably shy away, but I suppose there must be others based on FTSEAllWorld or similar?
As I said your effectively betting on the FTSE, some have up and downside, some protect capital.
when I took mine 3 years ago I did two, one with the risk of losing capital, one without. The last matures on Thursday so short of the FTSE going below 6244 I’m safe!!
at the time I did with Investec via Golfie, most were FTSE100 but there were others like S&P500 etc.
Investec no longer sell structured products, I could be wrong but generally you have to go through an advisor, I’d say that we’re wise anyway.
Just had an email through regarding a Deposit-based Structured Product & has the usual £85k protection. Based on the level of the FTSE in 5 years time it pays 40% (8%pa) if the FTSE is at least level with its starting point or 35% (7%pa) if the FTSE is at least 90% of its starting point. 2nd option seems very tempting - but obviously these are taxable in line with usual savings accounts, although are ISA-able so can put £20k for tax-free returns.
So you are just 'risking' not getting additional upside if the FTSE does better than 8% per annum?
Yep.... thats about the long & short of it.
Obviously there are other implications such as tax (income tax in a Deposit based SP structure) compared to CGT if you invest in the FTSE directly and also the fixed time frames involved
Just thought it was worth pointing out to those trying to get a good return on their cash deposits.
Ps
Obviously this is not a solicitation to buy or a financial promotion advertisement.
Thanks - what is the product to learn some more?
Its called a "Structured Product" and as @Rob7Lee says its really just a bet against an Index. Generally for UK investors the Indices used are the FTSE100, S&P500 and the EuroStox50. There are 2 types of Structured products; Deposit and Investment. Deposit ones are usually Capital Protected (up to the £85k FSCS limit) and means that your initial investment is safe & returned on maturity. Investment based ones are not protected & you can lose your initial capital (usually after a certain barrier has been breached so will give you some protection (usually 40%) ). The main other difference between the 2 is that Deposit ones are taxed as income whereas Investment based ones use CGT. Over the past 15 years I've generally advised Investment based ones as my clients are mostly higher rate taxpayers & so paying 40% tax on returns wasn't worth it. Also, most clients don't use their annual CGT allowance so this was a good way of mitigating any tax that would become due.
However, with the reduction in the CGT allowance I find the Investment based SP's are now almost redundant, and with the rising interest rate Deposit based ones are having to fight with Banks for peoples' money and (as can be seen) are producing some decent returns.
So currently the one I mentioned closes on July 21st. A reading of the FTSE100 is then taken and that is the Initial Level which the returns are measured against. Option 1 will pay 40% (8%pa over the 5 year term) should the FTSE100's level on 21st July 2028 be at least 1 point higher than the Initial level (so lets say 7600 points now - it has to be 7601 in 5 years time). If that is the case you will get back your initial investment plus 40%. Option 2 will pay 35% as long as the FTSE100 is more than 90% from its Initial Level - so 7600x90%=6840. If the FTSE100 is at 6841 in 5 years time you'll get back your initial investment plus 35%.
In essence, the FTSE100 falls 10% over the next 5 years & you get a 35% gain. If it falls 11% over that time period you only get your money back.
However (2) - these are not for everyone and really only for people who annually use their ISA allowance, have "spare" money and are prepared to lock their money up for 3,4,5 or 6 years.
Oh.........and as @Rob7Lee also says - you generally have to go through an IFA to invest in one, certainly if its your first "dabble" in them.
Oh well, I am not going to bother with structured products. It now looks even more likely there will be simple 1 year fixes with well respected names, 5% at least until year end. If as @IdleHans does you invest in tranches over time you have the flexibility to put some money back in to equities also over time as we get a clearer idea of how the world economy is going to develop.
Works for me. But I’m in the game of protecting what I have, due to my life stage.
Seems to me there will be wider implications for equity and bond markets and the industry around them.
Oh well, I am not going to bother with structured products. It now looks even more likely there will be simple 1 year fixes with well respected names, 5% at least until year end. If as @IdleHans does you invest in tranches over time you have the flexibility to put some money back in to equities also over time as we get a clearer idea of how the world economy is going to develop.
Works for me. But I’m in the game of protecting what I have, due to my life stage.
Seems to me there will be wider implications for equity and bond markets and the industry around them.
I hope you are also in the game of spending some/most/all of it!
Oh well, I am not going to bother with structured products. It now looks even more likely there will be simple 1 year fixes with well respected names, 5% at least until year end. If as @IdleHans does you invest in tranches over time you have the flexibility to put some money back in to equities also over time as we get a clearer idea of how the world economy is going to develop.
Works for me. But I’m in the game of protecting what I have, due to my life stage.
Seems to me there will be wider implications for equity and bond markets and the industry around them.
I hope you are also in the game of spending some/most/all of it!
Oh sure. “Capital projects” in the last year on the house,the cottage, and a new car. There would be more if only there were the people to do it. Labour shortages a big issue here in many areas. I became a small time political donor last year too. Not to mention regularly rolling around central Europe on trains and staying in decent hotels along the way ( living the dream😂)
All that said, though, i have to bear in mind that I’m not blessed with external pensions. Just the UK State standard plus something from the Czech state which is about half the UK one. That’s why I’ve belatedly become focused on generating income.
Oh well, I am not going to bother with structured products. It now looks even more likely there will be simple 1 year fixes with well respected names, 5% at least until year end. If as @IdleHans does you invest in tranches over time you have the flexibility to put some money back in to equities also over time as we get a clearer idea of how the world economy is going to develop.
Works for me. But I’m in the game of protecting what I have, due to my life stage.
Seems to me there will be wider implications for equity and bond markets and the industry around them.
I hope you are also in the game of spending some/most/all of it!
Oh sure. “Capital projects” in the last year on the house,the cottage, and a new car. There would be more if only there were the people to do it. Labour shortages a big issue here in many areas. I became a small time political donor last year too. Not to mention regularly rolling around central Europe on trains and staying in decent hotels along the way ( living the dream😂)
All that said, though, i have to bear in mind that I’m not blessed with external pensions. Just the UK State standard plus something from the Czech state which is about half the UK one. That’s why I’ve belatedly become focused on generating income.
Good stuff, whilst income is great, capital can be (moderately) spent. I intend to spend all/most of mine before I pop my clogs. The kids can have the house.
Oh well, I am not going to bother with structured products. It now looks even more likely there will be simple 1 year fixes with well respected names, 5% at least until year end. If as @IdleHans does you invest in tranches over time you have the flexibility to put some money back in to equities also over time as we get a clearer idea of how the world economy is going to develop.
Works for me. But I’m in the game of protecting what I have, due to my life stage.
Seems to me there will be wider implications for equity and bond markets and the industry around them.
I hope you are also in the game of spending some/most/all of it!
Oh sure. “Capital projects” in the last year on the house,the cottage, and a new car. There would be more if only there were the people to do it. Labour shortages a big issue here in many areas. I became a small time political donor last year too. Not to mention regularly rolling around central Europe on trains and staying in decent hotels along the way ( living the dream😂)
All that said, though, i have to bear in mind that I’m not blessed with external pensions. Just the UK State standard plus something from the Czech state which is about half the UK one. That’s why I’ve belatedly become focused on generating income.
Good stuff, whilst income is great, capital can be (moderately) spent. I intend to spend all/most of mine before I pop my clogs. The kids can have the house.
Oh well, I am not going to bother with structured products. It now looks even more likely there will be simple 1 year fixes with well respected names, 5% at least until year end. If as @IdleHans does you invest in tranches over time you have the flexibility to put some money back in to equities also over time as we get a clearer idea of how the world economy is going to develop.
Works for me. But I’m in the game of protecting what I have, due to my life stage.
Seems to me there will be wider implications for equity and bond markets and the industry around them.
Good idea not to touch structured products IMO. I was "advised" to invest in some of these by my disastrous Bangkok-based English IFA. Fortunatley two of them gave me a good profit but the third wiped out all that profit and a bit more.
It's like investing your hard-earned money on the 3:30 at Ripon!
Oh well, I am not going to bother with structured products. It now looks even more likely there will be simple 1 year fixes with well respected names, 5% at least until year end. If as @IdleHans does you invest in tranches over time you have the flexibility to put some money back in to equities also over time as we get a clearer idea of how the world economy is going to develop.
Works for me. But I’m in the game of protecting what I have, due to my life stage.
Seems to me there will be wider implications for equity and bond markets and the industry around them.
Good idea not to touch structured products IMO. I was "advised" to invest in some of these by my disastrous Bangkok-based English IFA. Fortunatley two of them gave me a good profit but the third wiped out all that profit and a bit more.
It's like investing your hard-earned money on the 3:30 at Ripon!
i managed currency exposure in a couple of previous jobs and the banks were always tremendously keen to offer structured products. My role was simply to try and preserve margins when we were buying goods in USD and selling either in sterling or EUR - very simple really, and some forward exchange contracts or occasionally options would protect our relatively high margins in a simple way. But they were always offering structured products and although I understood them at the time (dont ask me now) I didnt think they added any benefit to the business, simply a layer of complexity, particularly for me as I was working for US companies and having to explain even basic foreign exchange concepts to my bosses was a nightmare as theyre so dollar-centric.
Also made accounting for these contracts more complex, work I could well do without. With all these things, there's some bugger in the middle taking a fat cut at your risk not theirs. If you dont understand them, leave well alone. If you do understand them, leave well alone.
Nothing wrong with Structured Products as long as you know what you are getting into.....but then I have skin in the game.
97% of SP's that I've advised on have gone on to give a positive return.
2% have returned just the initial investment with no gain.
1% have returned a negative figure. This was a fairly niche one that invested in just 4 shares, and 1 share never recovered from a downgrade it received 2 years after the launch.
However, I am loathe to advise on them following the changes to the CGT allowance.
Best financial plan for me will be to try and convert a deposit into a potential full sum to purchase a house in the next 1/3 years. Theoretically, prices should drop sharply for certain types/areas following a housing market crash.
Best financial plan for me will be to try and convert a deposit into a potential full sum to purchase a house in the next 1/3 years. Theoretically, prices should drop sharply for certain types/areas following a housing market crash.
Problem is even if prices drop dramatically that’ll be eaten up and some by increased interest rates.
a £125k mortgage today is the same as a £225k mortgage 18 months ago.
you need the reverse perfect storm of prices AND interest rates dramatically reducing.
Best financial plan for me will be to try and convert a deposit into a potential full sum to purchase a house in the next 1/3 years. Theoretically, prices should drop sharply for certain types/areas following a housing market crash.
Problem is even if prices drop dramatically that’ll be eaten up and some by increased interest rates.
a £125k mortgage today is the same as a £225k mortgage 18 months ago.
you need the reverse perfect storm of prices AND interest rates dramatically reducing.
If I read it correctly @mendonca was saying that he is hoping his (now) deposit would be enough in a few years time to buy a property outright (without a mortgage).
Sorry lad but that really isn't going to happen, unless you are sitting on a 75% deposit now.
Property prices might drop but I probably only by around 10%. Still too much demand & not enough supply.
What am I missing with this. To my basic mind the bank of England raising interest rates again does nothing for inflation, and if I have understood the rationale for raising rates to combat inflation they will need to go a hell of a lot higher than half a percent a month and who does that help? Nobody at the bottom/most of the country. If people start defaulting on mortgages because interest has got too high that isn't going to solve a housing problem
Its good for people with no mortgage who have lots of savings and that has to be the minority of the population and savers are just that, savers, they don't spend. The people getting rumped do spend but are less able to now
Every time I think I understand money and finance something like this happens and I'm back to square 1 again
What am I missing with this. To my basic mind the bank of England raising interest rates again does nothing for inflation, and if I have understood the rationale for raising rates to combat inflation they will need to go a hell of a lot higher than half a percent a month and who does that help? Nobody at the bottom/most of the country. If people start defaulting on mortgages because interest has got too high that isn't going to solve a housing problem
Its good for people with no mortgage who have lots of savings and that has to be the minority of the population and savers are just that, savers, they don't spend. The people getting rumped do spend but are less able to now
Every time I think I understand money and finance something like this happens and I'm back to square 1 again
You said it in the last sentence of your second to last paragraph....."the people getting rumped do spend but are less able now".
That's all there is to it. The idea (flawed in my mind) is that by raising the cost of borrowing (not just to home owners but business as well) then people have less to spend. If they spend less then prices wont go up so fast. Inflation is too much money chasing too few goods. By making people have less money in their pockets means they cant spend so much......so prices stop rising.
But as Blackadder once said. "There was one thing wrong with their plan. It was bollox".
The only way this current strategy will work is when mortgage payers start coming off their 5 year fixed rate of 0.99% and have to go onto a new rate of 5%. That is going to hurt. But the hurt is 3 years or so away. Not really going to bring inflation down now. Is it ?. All that is being created is panic in the money markets, panic with lenders, which then filters down to home owners & home buyers. I've been arranging mortgages for 30 years & I've never seen a major mortgage lender (HSBC) pull their rates twice in a week.
30 years ago John Major had this problem. He was called a 1 club golfer (being that he only had 1 club in his bag to do the job of reducing inflation- raise interest rates). He said "if it isn't hurting it isn't working". He lost the next election and the Tories were out of power for 13 years. Labour's big mistake was to then give the BOE independence.
I am not an economist & I believe there could be other ways of bringing inflation down. What they are though I have no clue. But this current ploy of simply raising interest rates every month without waiting to see the outcome is crazy.
It's something we are talking about at work more and more.
We basically sell a lot of products between £20 and £150 to consumers all over the world, and do about £200k a month through our direct to consumer channels. Our key customer is someone between 45 and 65, but particularly 55-65, so slightly more protected than the average due to probably paying most of their mortgage off/mortgage free.
They've crumbled since March (by around 25%), in both the US and UK and that is persisting.
When discussing yesterday at our board call, I pointed out that as well as tough macro economic conditions, we have the Fed and BoE against us, as this is literally what they're trying to do. Cut down people's spending.
An economist at JP Morgan who advised Jeremy Hunt has actually said the bank may need to trigger a recession...
"They have to create uncertainty and frailty, because it’s only when companies feel nervous about the future that they will think ‘Well, maybe I won’t put through that price rise’, or workers, when they’re a little bit less confident about their job, think ‘Oh, I won’t push my boss for that higher pay’"
Christ....
Interest rate rises are an incredibly blunt tool, and I really feel they don't have the desired impact, and nowhere near fast enough.
This surely should be done through the taxation system, the week it emerged that debt to GDP has topped 100%... Taxing people more won't impact confidence in the market as much either in my opinion, as right now I'm sitting here thinking "we are trying to create a recession" which impacts my confidence in the economy, rather than "the government is upping taxes to cool the economy, in a targeted manner."
To be clear on taxation, it would have to hurt almost everyone, this wouldn't be a "tax the rich" kind of call, it would have to impact almost everyone's ability to spend and would be regressive most likely too (in order to have desired effects). VAT for example, income tax/NI levels. I believe it can be a much more targeted approach than interest rate rises.
As it stands you can have two neighbours, one who is absolutely fucked and has to sell their house because they had a high LTV when it comes to remortgage, and another who is loving it because their mortgage is paid, and now they're richer than ever getting 5% on savings and spending it up. You can argue about whether some people have been responsible/irresponsible (a lot of it will just be down to age, someone buying their first home at a high LTV during COVID on a 2 year fix (me) is in big trouble for example) but that won't change the inflation figures. Changing income tax/CGT/corporation tax however would have that desired impact and much faster. I suppose that the issue with that is that you'd need other countries to join in otherwise you'll have some pretty big currency shocks when they start increasing their rates.
If we did this, and the Fed for example kept increasing interest rates instead, the pound would presumably lose a lot of value against the dollar which would be pretty catastrophic for an import economy, and lead to... Inflation!. Although I suppose you could use a combo of rates and tax, but much less on rates than we are currently seeing.
On top of that, supply side stimulus (despite injecting more cash into the economy) has to be something that is considered in an inflationary environment, surely?
Sorry I just realised how long I went on for there, but macro/micro economics fascinates me. It's not often I get the opportunity to spend ages at work talking macro economics either as it's almost entirely out of our control so people lose interest. That's a big mistake in a situation like this.
Does anyone have any experience of Advanced Subscription Agreements? Either from the position of an investor or a business?
Just wondering what the main pitfalls can be of them, I know that not correctly defining what a qualifying event is, as well as the longstop date are two major issues.
I’m not an economist either, but it seems to me the strategy of raising interest rates to bring down inflation will work best if the inflation is caused by demand outstripping supply causing prices to go up.
That doesn’t look like the route cause of this inflation, which is in a large part being caused by the cost of supply going up and then being passed onto customers. This then becomes a vicious cycle in that those customers are also workers in the economy and their wage demands getting higher pushes the cost of supply up further.
High energy prices, oil prices, a weak pound and limited supply of materials and components all have an effect on the cost of supplying the product to the end user. If these costs could be brought down then that might have an effect on reducing inflation. How that is achieved though is another matter.
Comments
Not too bothered as rates will likely bump up this week, but I'll be surprised if there's a better three year rate than that in the near term.
On the subject of cautious investors tempted into such deals (rather than equity markets), this FT article tends to suggest that currently we are not such mugs.
Rate rises erode investors’ incentive to hold US companies’ shares; Three-month Treasuries to yield as much as bonds and equities over the next year, analysts predict.
I moved some holdings in US equity funds into a money market fund this weekend. It's because I took on board a string of articles showing how the S&P 500 is dominated in weighting by 6-7 companies -mainly the usual Big Tech boys - and it is they who have driven the index performance up. The other companies in the index are actually not generally doing well at all, it turns out (its a similar but different phenomenon to the FTSE100 situation, the index dominated by Big Legacy Energy, and thus not a measure of how British business more generally is doing).
How does it work if FTSE was lower than 90%? Capital protected but no return or does it taper down from there?
Obviously there are other implications such as tax (income tax in a Deposit based SP structure) compared to CGT if you invest in the FTSE directly and also the fixed time frames involved
Just thought it was worth pointing out to those trying to get a good return on their cash deposits.
Ps
Obviously this is not a solicitation to buy or a financial promotion advertisement.
when I took mine 3 years ago I did two, one with the risk of losing capital, one without. The last matures on Thursday so short of the FTSE going below 6244 I’m safe!!
at the time I did with Investec via Golfie, most were FTSE100 but there were others like S&P500 etc.
Investec no longer sell structured products, I could be wrong but generally you have to go through an advisor, I’d say that we’re wise anyway.
However, with the reduction in the CGT allowance I find the Investment based SP's are now almost redundant, and with the rising interest rate Deposit based ones are having to fight with Banks for peoples' money and (as can be seen) are producing some decent returns.
So currently the one I mentioned closes on July 21st. A reading of the FTSE100 is then taken and that is the Initial Level which the returns are measured against. Option 1 will pay 40% (8%pa over the 5 year term) should the FTSE100's level on 21st July 2028 be at least 1 point higher than the Initial level (so lets say 7600 points now - it has to be 7601 in 5 years time). If that is the case you will get back your initial investment plus 40%. Option 2 will pay 35% as long as the FTSE100 is more than 90% from its Initial Level - so 7600x90%=6840. If the FTSE100 is at 6841 in 5 years time you'll get back your initial investment plus 35%.
In essence, the FTSE100 falls 10% over the next 5 years & you get a 35% gain. If it falls 11% over that time period you only get your money back.
However (2) - these are not for everyone and really only for people who annually use their ISA allowance, have "spare" money and are prepared to lock their money up for 3,4,5 or 6 years.
Oh.........and as @Rob7Lee also says - you generally have to go through an IFA to invest in one, certainly if its your first "dabble" in them.
https://nsandi-corporate.com/news-research/news/summer-boost-savers-nsi-increases-premium-bonds-prize-fund-rate-and-junior-isa
Current and new Premium Bonds prize fund rate and odds
Current prize fund rate
Current odds
New prize fund rate (from July 2023)
Odds from July 2023 (no change)
3.30% tax-free
24,000 to 1
3.70% tax-free
24,000 to 1
Number and value of Premium Bonds prizes
Value of prizes in June 2023
Number of prizes in June 2023
Value of prizes in July 2023 (estimated)
Number of prizes in July 2023 (estimated)
£1,000,000
2
£1,000,000
2
£100,000
63
£100,000
71
£50,000
125
£50,000
141
£25,000
252
£25,000
284
£10,000
627
£10,000
707
£5,000
1,257
£5,000
1,417
£1,000
13,361
£1,000
14,960
£500
40,083
£500
44,880
£100
1,421,012
£100
1,744,226
£50
1,421,012
£50
1,744,226
£25
2,163,534
£25
1,503,501
Total
£334,047,650
Total
5,061,328
Total
£374,026,425
Total
5,054,415
Works for me. But I’m in the game of protecting what I have, due to my life stage.
Seems to me there will be wider implications for equity and bond markets and the industry around them.
It's like investing your hard-earned money on the 3:30 at Ripon!
97% of SP's that I've advised on have gone on to give a positive return.
2% have returned just the initial investment with no gain.
1% have returned a negative figure. This was a fairly niche one that invested in just 4 shares, and 1 share never recovered from a downgrade it received 2 years after the launch.
However, I am loathe to advise on them following the changes to the CGT allowance.
a £125k mortgage today is the same as a £225k mortgage 18 months ago.
you need the reverse perfect storm of prices AND interest rates dramatically reducing.
Sorry lad but that really isn't going to happen, unless you are sitting on a 75% deposit now.
Property prices might drop but I probably only by around 10%. Still too much demand & not enough supply.
Its good for people with no mortgage who have lots of savings and that has to be the minority of the population and savers are just that, savers, they don't spend. The people getting rumped do spend but are less able to now
Every time I think I understand money and finance something like this happens and I'm back to square 1 again
That's all there is to it. The idea (flawed in my mind) is that by raising the cost of borrowing (not just to home owners but business as well) then people have less to spend. If they spend less then prices wont go up so fast. Inflation is too much money chasing too few goods. By making people have less money in their pockets means they cant spend so much......so prices stop rising.
But as Blackadder once said. "There was one thing wrong with their plan. It was bollox".
The only way this current strategy will work is when mortgage payers start coming off their 5 year fixed rate of 0.99% and have to go onto a new rate of 5%. That is going to hurt. But the hurt is 3 years or so away. Not really going to bring inflation down now. Is it ?. All that is being created is panic in the money markets, panic with lenders, which then filters down to home owners & home buyers. I've been arranging mortgages for 30 years & I've never seen a major mortgage lender (HSBC) pull their rates twice in a week.
30 years ago John Major had this problem. He was called a 1 club golfer (being that he only had 1 club in his bag to do the job of reducing inflation- raise interest rates). He said "if it isn't hurting it isn't working". He lost the next election and the Tories were out of power for 13 years. Labour's big mistake was to then give the BOE independence.
I am not an economist & I believe there could be other ways of bringing inflation down. What they are though I have no clue. But this current ploy of simply raising interest rates every month without waiting to see the outcome is crazy.
We basically sell a lot of products between £20 and £150 to consumers all over the world, and do about £200k a month through our direct to consumer channels. Our key customer is someone between 45 and 65, but particularly 55-65, so slightly more protected than the average due to probably paying most of their mortgage off/mortgage free.
They've crumbled since March (by around 25%), in both the US and UK and that is persisting.
When discussing yesterday at our board call, I pointed out that as well as tough macro economic conditions, we have the Fed and BoE against us, as this is literally what they're trying to do. Cut down people's spending.
An economist at JP Morgan who advised Jeremy Hunt has actually said the bank may need to trigger a recession...
"They have to create uncertainty and frailty, because it’s only when companies feel nervous about the future that they will think ‘Well, maybe I won’t put through that price rise’, or workers, when they’re a little bit less confident about their job, think ‘Oh, I won’t push my boss for that higher pay’"
Christ....
Interest rate rises are an incredibly blunt tool, and I really feel they don't have the desired impact, and nowhere near fast enough.
This surely should be done through the taxation system, the week it emerged that debt to GDP has topped 100%... Taxing people more won't impact confidence in the market as much either in my opinion, as right now I'm sitting here thinking "we are trying to create a recession" which impacts my confidence in the economy, rather than "the government is upping taxes to cool the economy, in a targeted manner."
To be clear on taxation, it would have to hurt almost everyone, this wouldn't be a "tax the rich" kind of call, it would have to impact almost everyone's ability to spend and would be regressive most likely too (in order to have desired effects). VAT for example, income tax/NI levels. I believe it can be a much more targeted approach than interest rate rises.
As it stands you can have two neighbours, one who is absolutely fucked and has to sell their house because they had a high LTV when it comes to remortgage, and another who is loving it because their mortgage is paid, and now they're richer than ever getting 5% on savings and spending it up. You can argue about whether some people have been responsible/irresponsible (a lot of it will just be down to age, someone buying their first home at a high LTV during COVID on a 2 year fix (me) is in big trouble for example) but that won't change the inflation figures. Changing income tax/CGT/corporation tax however would have that desired impact and much faster. I suppose that the issue with that is that you'd need other countries to join in otherwise you'll have some pretty big currency shocks when they start increasing their rates.
If we did this, and the Fed for example kept increasing interest rates instead, the pound would presumably lose a lot of value against the dollar which would be pretty catastrophic for an import economy, and lead to... Inflation!. Although I suppose you could use a combo of rates and tax, but much less on rates than we are currently seeing.
On top of that, supply side stimulus (despite injecting more cash into the economy) has to be something that is considered in an inflationary environment, surely?
Sorry I just realised how long I went on for there, but macro/micro economics fascinates me. It's not often I get the opportunity to spend ages at work talking macro economics either as it's almost entirely out of our control so people lose interest. That's a big mistake in a situation like this.
Just wondering what the main pitfalls can be of them, I know that not correctly defining what a qualifying event is, as well as the longstop date are two major issues.
That doesn’t look like the route cause of this inflation, which is in a large part being caused by the cost of supply going up and then being passed onto customers. This then becomes a vicious cycle in that those customers are also workers in the economy and their wage demands getting higher pushes the cost of supply up further.