Market potential with capital protection
Potential Returns | Capital Protection | Counterparty Risk | FSCS | Risk and Return | Portfolios | Income and growth
Structured deposits are a type of fixed term investment plan which offer capital security similar to a savings account but with returns linked to a market, such as the FTSE 100 Index.
While returns are not normally guaranteed in structured deposit plans they offer the potential for competitive rates of returns over fixed terms. When interest rates are low they can offer investors a relatively low risk exposure to market performance.
The plans also offer protection from market volatility but as returns are set to a defined level you do not have complete exposure to the performance of the underlying index or asset.
In a deposit plan money is held with a deposit taker, such as a high street bank, which provides capital security comparable with a savings account. Other plans which offer capital protection, but are not deposit structures, will be backed by a bond and will not necessarily provide level of capital security that a deposit does.
Capital is at risk if the counterparty to the plan, the deposit taker, is unable to meet its liabilities and repay investors.
In the event that the deposit taker becomes insolvent and cannot meet its liabilities, as long as the deposit taker is an FSA authorised institution, such as a UK bank, you may be eligible for compensation from the Financial Services Compensation Scheme (FSCS).
The FSCS deposit protection scheme covers an individual up to £75,000 per authorised institution. See the Savings Protection Guide for more information.
See the table below for examples of structured deposit plans: