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by bob7685 17 November 2009 |

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intended to transfer to Chelsea BS at 3.25%AER. Whilst in the branch yesterday, I was shown their Guarenteed Capital Account 4 (linked with Credit Suisse) which is a five year term linked to the FTSE 100 index that guarentees minimum 10.5% groos at maturity and potential 50% growth after 5 years.
Why does this product not feature on your tables?
Any comments on merits would be welcome.
Need to get application in by 26th Nov.

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804

MikeGG1 posted
http://www.thechelsea.co.uk/savings/invest_postal30_intro.html
3.5% in Chelsea Postal account.
These Equity linked products are based on derivatives. They take all the dividends to pay for the capital guarantee and yet the term is long enough to virtually ensure that the insurance isn't needed. On top of that they don't pay all of FTSE growth.
You are better buying a Tracker. Then you can utilise the rest of your £10,200 ISA allowance.
Mike
Posted on 17 November 2009 | Love 2 loves Report
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bob7685 posted
Thanks for your reply Mike. The reason I want to move the £38k from NatWest is after the twelve month bonus period, it was transferred to their cash ISA at 1.75%AER. The best they can offer is to transfer to their eISA at 2.50%AER. All I was looking for was to transfer to the best interest provider which I thought was Chelsea BS (for over 50's only) at 3.25% AER. Anyone know a provider offering a better rate?
Can you transfer the accumulated ISA funds into a tracker?
If so, any suggsetions?
Thanks for any help from a non-financial guy just looking to maximise his return on ISA's.
Posted on 17 November 2009 | Love 0 loves Report
129

Donna Ferguson posted
Hi Bob,
We really, really, really don't like Guaranteed Equity Bonds (GEBs) here at lovemoney.com, which is what that Guaranteed Capital Account sounds like to me.
We explain why in depth in this article: Avoid these scandalous savings accounts.
It's complicated but a quick summary is:
1) these bonds are marketed as 'guaranteed', but scandalously this doesn't necessarily mean your money is always safe. The guarantee isn't normally provided by the bond company but by a third party. If that third party goes bust - which is exactly what happened to investors whose bonds were backed by Lehman Brothers - investors stand to lose all their money.
2) if the indices are lower at the end of the term than the beginning, you'll get back just a 10% return on your original investment, which may also have been eroded by inflation by that time.
3)if shares do well, unlike investing in shares directly, you won't earn a return from the dividends.
4) It's never, EVER a good idea to invest in a financial instrument you don't fully understand. A GEB is a very complex product - here at lovemoney.com we think it's best to go for simple accounts that are easy to understand. Watch our video: Keep it simple
If you do decide to go for this account, I suggest you read the small print very carefully indeed. At the end of the day, you're being offered a stock market return without a stock market risk - and that simply doesn't exist in the real world, which is why this product is always riddled with complex catches and get-out-clauses.
Be wary!
Posted on 17 November 2009 | Love 3 loves Report
129

Donna Ferguson posted
PS If it were me, I'd stick the cash in the Teachers Building Society Cash ISA Plus Issue 1.
It pays 3% AER if you transfer over £25,000 (the rate drops to 2.75% if you only invest between £3,600 and £24,999).
Only downside is withdrawals cost you 90 days interest (but you can withdraw your cash immediately).
If you want a better return, then your only option really is to go for one of these GEBS, which personally I think is a bad idea. But if you do go for one, have a look at Abbey and Alliance & Leicester and Bradford & Bingley. I think they've got a similar arrangement to the Chelsea BS where you have to invest in a GEB to get a market-leading ISA rate, but they pay 5.75% AER on the ISA - so a much better return than the one offered by the Chelsea.
Posted on 17 November 2009 | Love 0 loves Report
75

Ed Bowsher posted
Hi Bob,
I agree with everything that Mike and Donna have said.
And yes, you can transfer all your cash holdings into a stock and shares isa. However, once you've transferred cash to stocks and shares, you can't transfer back to cash. But you could transfer your money from the tracker to another form of stock market investment if you wished.
The cheapest trackers these days come from Vanguard and HSBC. HSBC's FTSE All Share tracker should do the trick for you.
Of course, any stock market investment carries risk. Given that share prices are still at fairly low historic levels, I think there's a strong chance that a UK tracker fund will peform well over the next five or six years, but there are no guarantees.
If you don't want to take that risk, go for the cash isas with the highest interest rates such as Chelsea's.
Regards,
Ed Bowsher, lovemoney.com staff member
Posted on 17 November 2009 | Love 0 loves Report
804

MikeGG1 posted
Hey, Guys
In my first post I mentioned the Chelsea postal 30 and gave a link. That is 3.50% over £25,000 with only 30 days notice or immediate with loss of 30 days interest.
I make that 3/4% higher than your Teachers account with 60 days less notice or loss of interest.
Mike
Posted on 17 November 2009 | Love 2 loves Report
129

Donna Ferguson posted
Ah good point Mike, yup that's a much better account! Only downside is you have to operate it by post, but then I reckon that's worth doing if it nets you an extra 0.5%, especially on £38,000! Good spot, thank you.
Posted on 17 November 2009 | Love 0 loves Report
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bob7685 posted
Many thanks to Donna and Ed for their comments, and especially to Mike for the tip on the Chelsea 30 Cash ISA which seems the best option for me with no risk. I just wonder how many over 50's are taking out the "special" ISA rate of 3.25% with Chelsea, like me not realising that 3.50% is on offer from the same provider!
You guys at lovemoney might want to give Mike the chance to write an article!!!
Posted on 18 November 2009 | Love 0 loves Report

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