Structured deposits

Thursday, 11 February 2016

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Independent advice on savings and investments, Edinburgh, Fife & UK

It is tougher than ever to find a savings account paying a decent rate of interest. Even long term fixed savings accounts are paying as little as 2.5%-3% per year, and that is in exchange for locking your money away for 5 years. Not an attractive prospect.

There is, however, another option. Structured deposits give you the safety of a bank deposit account (including a money-back guarantee from the Financial Services Compensation Scheme, or FSCS) with the potential gains to be had from investing in the stockmarket.

Here’s how a typical structured deposit works.

a) You put your money into a deposit account with a bank, with a fixed term of 6 years (you can get your money back before the end of this period if needed, but if you do this then you may not get all your money back).

b) If the FTSE 100 Index falls over the 6 year period then you get your initial money back.

c) If the FTSE 100 Index rises even tiny bit over the 5 year period then you get 30% interest on your money.

Let’s be clear about some of the pros and cons of this kind of account:

This plan may be right for you if:

  • You want a guaranteed full return of your initial deposit at maturity.
  • You are looking for a plan with returns linked to the performance of the stockmarket.
  • You do not need access to your money over the next 5 years.
  • You want a tax-efficient return using your ISA allowance or via a pension.
  • You have a minimum of £3,000 to invest.

This plan may not be right for you if:

  • You want a regular income and dividends.
  • You may need immediate access to your money before maturity.
  • You cannot commit to the full 5 year term.
  • You want a guaranteed return on your deposit.

As mentioned earlier, this plan is backed by the Financial Services Compensation Scheme just like an account with any high street bank. Think of it like a savings account where the interest rate is determined by the performance of the stockmarket, and could be anything from 0% to 100% or even higher.

If you want more details please get in touch.

Independent financial advice. Regulated by the Financial Conduct Authority (FCA no. 603653). Company no. SC450460