Are Guaranteed Returns the Way Forward?

The Government-backed National Savings & Investment (NS&I) has released new guaranteed returns products for nervous investors.

The idea behind such products is that they are directly linked to the FTSE 100 movements.  They mean that no matter what the market does, returns will be made.  Investors will get around 40 per cent over five years if the index moves up.

The provider uses 70 per cent of the investment cash to purchase a bond which pays 100 per cent of the original in around five years time.  The rest of the money is used for charges and for buying derivatives which are linked to stock market growth.

Watch out though – by choosing Treasury-backed products you may be secure, but you are likely to be hit by hefty charges for the luxury.

There are some who view guaranteed return products as a bit of a scam – are they not transparent enough, are they too expensive to manage? – so it would be best to talk it all over with your IFA!

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