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A Guide to Lump Sum investments

 

Guaranteed Equity Bonds

Issued by NS&I, the Post Office and private companies, in theory these enable you to play the Stock Market and keep your capital intact. Your return is linked to the performance of the stock market: if it goes up you win; if it goes down you get back at least your original investment.

Most of the bonds are linked to the performance of the FTSE 100 Share Index over five years. Your return depends on (a) the actual rise in the index, and (b) the share of that growth that is passed on to you, known as the ‘exposure rate’.

The negatives are: (1) You forfeit any dividend income (compared to a tracker), (2) Your gain is liable to income tax in the year it matures, (3) Exposure rates have fallen in the last few years and (4) You have no control over when to sell. As a result many people have found that in practice their returns are low.

Some private schemes have a clause which sets a lower limit to the capital guarantee, so take care you know any limitations.

NEXT STEPS

To learn about other investment options, return to the Introduction to investments section

To learn about the following investments, if you aren't already familiar with them click on the relevant link:

However if you feel that you need some help from a financial advisor, then visit our section on obtaining financial advice, or our page on LaterLife selected services and associated advice.

 

   
 
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