Belong Social Care bond to launch with 7.5% rate: how it works

A new bond is offering a whopping 7.5% annual return, but it lacks the vital protection afforded to traditional savings accounts. Is it right for you?

News that care home village Belong has issued a new bond paying 7.5% has attracted much media attention this week, but is this type of investment a safe place for your cash? 

The charity has issued a second ‘social bond’, which pays holders an income of 7.5%. The care provider operates eight villages for retirees and is building a new one.

The bond issue will allow Belong to purchase previous bonds issued and refinance its existing loan, as well as spend any leftover cash on building more retirement villages. 

The bond is for a period of five years and the minimum investment is £500. The closing date of the offer is 30 June 2025. 

Investors who already hold their previous bonds, issued in 2018 with a 4.5% rate of return, have the option to exchange them for the new one. 

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What is a bond?

A bond is essentially debt and a loan made to the issuer  – in this case, Belong.  

You are effectively lending money to the charity in return for an interest payment on the cash. 

It is known as a fixed-income investment. 

Governments and companies often use bonds to fund major projects, such as, in the case of the Government, building new roads or other infrastructure projects.

Bonds have maturity dates when the principal – the original capital invested - must be paid back in full.

Belong’s bond will be traded on the London Stock Exchange and will be available to purchase from stockbroker AJ Bell and Interactive Investor. 

Interest payments will be made on 7 January 7 and 7 July each year, with the first set to be due in January 2026. 

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Is it right for you?

The prospect of earning 7.5% on your funds is particularly tempting given that traditional savings rates have been falling in recent months.

At the time of writing, the best five-year savings bond, from Hampshire Trust Bank, currently pays a rate of 4.46%

On a £10,000 pot, you'd potentially sacrifice more than £300 interest by putting your money there compared to investing in the Belong bond.

But obviously the savings account option is completely risk-free, provided you keep your deposit below the £85,000 FSCS deposit savings limit. 

There is no such protection if you invest in the bond instead.  

Whether you will get your capital and your interest payment back will depend entirely on whether the issuer – in this case, Belong – will be in a position to repay you when the bond matures in five years. 

So you need to decide whether you're comfortable taking on that risk for the extra reward. 

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