Structured Deposits Guide
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.
Potential returnsWhile 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. |
Capital protection
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.
Counterparty risk
Capital is at risk if the counterparty to the plan, the deposit taker, is unable to meet its liabilities and repay investors.
Financial Services Compensation Scheme
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:
Provider | Plan Name | Deposit Taker | ISA Option | Term | Maximum Potential Return | More Info |
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Investec FTSE 100 Income Deposit Plan | Investec Bank plc | 6 years | 3.50% per annum | More Info > | ||
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Risk and return
One of the primary benefits of structured deposit plans is that they can offer market-linked returns without the volatility and risk of full exposure to that market. The most common underlying market for plans is the UK stock market, specifically the FTSE 100 Index.
For example, a 6 year plan could offer a minimum return of 15 per cent at the end of the term as long as the average level of the FTSE 100 is higher than the level at the start of the plan.
Portfolios
In an investment portfolio structured deposits can help limit exposure to falling markets, because capital is protected from market volatility. However, as the returns are generally dependent on an underlying index, in a falling market the investment will not yield a return.
Income and growth
Plans that aim to return a regular income payment are available, as well as plans that offer one off potential growth over the fixed term.
The structure
The two components of structured products are known as a note and a derivative. In a structured deposit the note would be the deposit account for the capital, while the derivative element is a financial instrument used to generate the potential return.
Provider | Plan Name | Deposit Taker | ISA Option | Term | Maximum Potential Return | More Info |
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FTSE 100 6 Year Deposit Plan | Investec Bank plc | 6 years | 45% at end of term | More Info > | ||
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FTSE 100 Kick Out Deposit Plan | Investec Bank plc | Up to 6 years | 6% per annum | More Info > | ||
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6 Year Defensive Deposit Plan | Investec Bank plc | 6 years | 25% at end of term | More Info > | ||
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FTSE 100 3 Year Deposit Plan | Investec Bank plc | 3 years | 15% at end of term | More Info > | ||
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FTSE 100 Defensive Kick Out Deposit Plan | Investec Bank plc | Up to 6 years | 4.5% per annum | More Info > | ||
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FTSE 100 3 Year Defensive Deposit Plan | Investec Bank plc | 3 years | 10.5% at end of term | More Info > | ||
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Important Risk Information:
This website contains information only and does not constitute advice or a personal recommendation in any way whatsoever. The value of investments and income from them can fall as well as rise and you may not get back the full amount invested. The tax efficiency of ISAs is based on current tax law and there is no guarantee that tax rules will stay the same in the future.
Different types of investment carry different levels of risk and may not be suitable for all investors. Please ensure that you read the Important Risk Information for further details. Prior to making any decision to invest, you should ensure that you are familiar with the risks associated with a particular investment and should read the product literature. If you are in any doubt as to the suitability of a particular investment, both in respect of its objectives and its risk profile, you should seek independent financial advice.