# Protected Equity Bond



## mba (Jun 17, 2006)

I am looking at investing in a relatively stable "6 Year Protected Equity Bond" from The Nationwide.

If all goes to plan i earn a maximum of 50% of my initial investment (max), if all goes **** up i get my original investment.

My question is after 2 years if the stock has grown to 50% (my maximum return possible) can i cash in the bond?

cheers


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## ChuckH (Nov 23, 2006)

Some You can Some You cant. Be very carefull with these plans as they are a minefield...


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## DiscoDriver (Oct 27, 2009)

Check the terms and conditions. I would personally presume you are locked in to the 6 year term (although there may be an option to cash in with some form of penalty for early redemption).


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## PDK (Apr 14, 2008)

Does it lock the interest in each year?

The way most of these bonds work is at a certain date the performance of an index is taken and providing it achieves even 0.01% then your interest is locked in, and a new year starts all over again.

So it could perform year 1, 5 & 6 - 3 years of achievement, and 3 years of underperforming

I haven't looked at Nationwides products in great detail, so it could be potential max (50%) divided by 6 years 8.33% per gross.

Using the example above of 1,5 & 6 you would only yield an AER of 4.16% - still good by the rates at the mo.

If you wanted to cancel/exit there *will* be a breakage charge, check what this is, if its a 6 year term then chances are you will not be able to achieve the return within 2 years.

Only put your funds into a long term product if your going to keep it there, I know it looks attractive but then thats why its a 6 year term.

The economy is still in a fragile state, and with the impending public jobs cuts, this will affect the output of the investment if stock market related.

Speak to an IFA - a whole of market one, and make sure they are whole of market as they will have access to products not availible on the high street.

Another area to check is your tax implications, as the total gross interest will be paid in year 6, and this is a taxable income, so lets assume you pay 40% tax, you invest £20k, achieves the max of 50% (£10k) £4k of that is gone in tax.

If you were a 20% tax payer, this additional income could push you into the 40% bracket.

Hope this helps


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## mba (Jun 17, 2006)

CHeers PDK thats a very informative post, if you have time i would be greatful if you could point me in the direction of how you calculated the AER in the example above. i like to be as informed as possible when i am investing £££, got stung before!


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