18 Dec 2011

A safe haven with greater Growth Potential than a Bank Account

A safe haven with greater Growth Potential than a Bank Account

Colin Scott, Financial Adviser looks at an opportunity for clients looking for a better return on their funds than can be expected from traditional bank and building society deposits at this time of historically low interest rates and high inflation.

Colin Scott, Financial Adviser looks at an opportunity for clients looking for a better return on their funds than can be expected from traditional bank and building society deposits at this time of historically low interest rates and high inflation.

At this time when the interest rate on Bank deposits is at an all time low and the confidence in the UK banks is decreasing on a daily basis, where does the lower risk investor go to try to improve their returns as well as combat the impact inflation is currently having on the real value of their savings? 

Structured Deposit plans may well be the answer. 

Structured Deposits are where the investor commits to saving for a fixed period of normally three or five years. At the end of the term, the investor could receive the originally agreed interest return from the bank and their original deposit. The product return is typically based on the performance of a share price index, such as the FTSE 100 but does not have the volatility associated with holding actual shares. 

The important thing to bear in mind is Structured Deposits products are always designed to return at least the initial amount deposited at the end of the product life. 

 UK investors in Structured Deposits will benefit from the Financial Services Compensation Scheme’s deposit insurance scheme which guarantees that a depositor is entitled to claim up to £85000 should the deposit holding bank be unable to meet its financial obligation to return your money at maturity.   

These plans are often used as part of a wider investment portfolio. In combination with “standard” investments, they provide lower risk and diversification so that if shares go down immediate loss does not occur

Your money should be committed for the full life of the product. You need to be reasonably certain that you will not need access to it earlier. Providers of these investments usually (but not always) allow investors to withdraw their funds early, but your return will reflect current market conditions, and since fees and charges are normally taken upfront, you may get back less than you invested. 

You should spread your Structured Deposit investments across a range of banks, and consider carefully which banks you use. The most widely used measures for assessing banks’ financial strength are the opinions of credit rating agencies such as Standard & Poor’s or Moody’s. 

Structured Deposits returns are usually based on the performance of share prices excluding dividends – whereas if you were to own shares directly you would expect to receive dividends. Most product returns are based on the performance of a broad stock market index, a measure of average share price performance. This diversifies your risk across a range of companies and business sectors. 

Structured Deposits are designed with the aim of returning at least your initial investment, regardless of share prices. But that protection normally only applies at the end of the product life; if you need to access your money early then you may get back less than your initial investment. Before deciding on an investment, you should consider the balance between risk and return across your investment portfolio. You may also wish to consider “worst case scenarios” for any potential Structured Deposit investments, particularly in the context of the performance of your portfolio as a whole. 

The above is not intended to be comprehensive explanation of the product involved however a meeting with one of our Independent Financial Advisers will ensure that you are fully aware of the terms and conditions of a Structured Deposit product and perhaps most importantly whether it is a possible solution facing many people at a time when we have low interest rates and high volatility.

Colin Scott, Financial Adviser


Please correct the errors below before submitting your request:

Get in touch

Our dedicated client contact team prefer to receive enquiries through our contact form. We'll endeavour to get back to you within 24 hours or during the course of the next working day.

Source of enquiry