Ulster Bank premier brands split return bond series 3

Always_Running

I may invest some of my savings in this, it says you earn a fixed return of 25% after two years and 75% of your investment tracks the share prices of 25 well known companies for 5 years.

Anyone here have this investment would anyone recommend it.

roro2

I'd be careful that you fully understand what you're getting in to. There is no way that you earn a fixed return of 25% after 2 years - it sounds like you may earn a fixed return of a much smaller amount on 25% of your investment.

It also sounds like this is a Tracker bond, but where some of your money (25% in this case?) is returned over a shorter period and is essentially put in a regaular fixed-rate deposit account that pays a slightly below-market interest rate. These types of Trackers have become popular in recent years, but the fixed-rate deposit element is essentially just marketing that gives the impression that your funds are not locked-in for as long a period.

This is probably just a type of deposit account, but it's difficult to say without more info. There are a few things to be careful of:

Most of your funds (75%?) are going to be locked away for 5 years, and the interest is going to be variable and linked to the stock market. But there is going to be some limitation - you will either just get a portion of an increase in the market, an increase up to a certain limit or you won't be fully protected to a fall in the stock market. This element can give the impression that you are investing in something more than a deposit account, and often allows the bank to get away with charging high fees for a deposit-type product (either explicitly, or through offering below-market interest rates, etc.).

Even if you are guaranteed 100% capital security, you will effectively lose out as your funds won't be worth the same in 5 years as they are now (inflation, etc.).

You will have zero access to the funds, unlike most deposit accounts where you can get access if you need to, sometimes with an interest penalty. You will get a portion (25%?) back after 2 years but, as I said, this is just marketing... why don't you put 25% of your funds in a 2-year deposit account? You would likely get a better interest rate and have some degree of access if needed.

You may be better just looking for a deposit account, and comparing the fixed returns you could get with the range of returns available from this product. If you want exposure to the stock market with a portion of your money, there is usually more efficient ways of doing that.

Always_Running

Thanks for the reply roro2. Going to explore my options at the moment before jumping in.

Some more info http://www.ulsterbank.ie/documents/ROI/Premier_Brands_Combination_Bond.pdf i presume series 1,3 are around the same. Minimum investment is 15k on the one i'm looking at.

chris85

Reading that there you dont get 25% back after two years. You get return of 1.55% per annum on 25% of the investment. 75% is then linked to stocks and the maximum return possible is 25% so could be 0% back on the 75% and you then really are losing out if 0% back as you get your capital back as you lose out based on inflation.

The money which you invest with Ulster Bank Ireland limited will be debited from your
account when you apply for the Premier Brands Split Return Bond and will not begin to earn
any interest until the start date on 5 April 2013.
25% of your total investment pays a return after two years of 8% Gross, 1.55% CAR (fixed). At the
end of the two years, you will receive back this capital amount, plus the fixed interest earned.
The remaining 75% of your investment will track the share price performances of the 25 Blue
Chip Companies over the full five years of the term. you will earn any growth in the portfolio at
the end of the five years. your Premier Brands Return will be based on the average performance
of the portfolio at the end of the term (including averaging over the last 12 months) up to a
maximum of 25% Gross, 4.56% CAR (variable).