Were You Mislead By Capital Protected Bonds?

Understanding Capital Protected Bonds

UK banks and insurance companies sell capital protected bonds and are known as a structured investment. A structured product is what is known as a fixed-term investment, in which the pay-out relies upon the performance of another factor, such as the stock market index.

What are Capital Protected Bonds?

Capital Protected Bonds offer individuals the chance to allow their investment to grow with the initial deposit staying protected. An individual’s return on capital protected binds is based upon the performance of the stock market, such as the FTSE 100. Typically, they were sold during the years of 2007 and 2012 for terms of 5 to 6 years. A structured product would generally tie your money up in that particular investment for the full term. If you decided that the product was not right for your investment needs, you could face high charges to end it.

If during this time, the market rose, you would see decent growth in your investment, however, if the market fell, your initial deposit was secure and safe.

However, it is important to understand that when your capital is protected from a falling market, the bank will change its management fees, meaning there will be a reduction in your initial deposit. While your capital is guaranteed, it is possible that you will receive less than what you put in due to various charges and fees.

A capital protected bond is a complex beast to fully understand, yet they were simply offered as a low risk investment due to the protection that was offered around them.

In many cases, the benefits of the offer were capped to allow for full market growth, in which you would see growth up to a specific percentage. In addition, considering one was not investing directly in the stock market, there was no ability to benefit from the possibility of dividend payments.

In many cases, at the end of the term if no profit was made or there was very little profit, you may have done better by simply placing your money in a standard savings account.

Many banks will offer these types of products by advertising them under a variety of names:

  • Structured Cash ISAs
  • Guaranteed Equity Bonds
  • Protected Investment Funds
  • Guaranteed Capital Plans

Lloyds, one of the major banks found within the United Kingdom, recently admitted to pushing these products when a typical saving accounts would have worked just as well. The advisors at Lloyds bank even promised their customers returns up to 75% with full protection on their capital.

Understanding How Capital Protected Bonds Were Mis-Sold

One of the most important things to understand about capital protected binds is the fact that they are highly complex products. You may have already been led to believe that they offer a guaranteed high return, and that is not entirely true. There are several factors which can help to create an increased rate, including:

  • At the time of investment you have either retired or are close to retirement.
  • You have very little experience in the investing world.
  • You have been identified as a likely investor after receiving a large amount of cash
  • Or you have been advised to place a large amount of your savings into one.
  • A large majority of customers were left disappointed after the returns they saw, with many hoping for better returns to get them through retirement.

Many banks offered these capital protected bonds to customers who did not fully understand them or had very little investing experience.

Many banks tended to overemphasis the possibility for high returns without fully explaining what would happen if the market fell. These bonds were described to the public as investing without the risk or minimal risk.

For customers who had very little investing experience, it was difficult for them to understand if the investment was sound or not. This meant that many individuals were placing all of their trust in the bank and its advisors in hopes that they were being given the best advice.

What Does This Mean To The General Public?

When you see that you capital protected fund has matured, it may have experienced some growth or it may have gained little to no increase as opposed to what you were expecting to see.

If you were sold a capital protected bond by Lloyds or any other United Kingdom business or bank and do not believe it performed as you were led to believe, it is essential to seek out professional help before making any type of a claim. As with so many experiences that are formulated at a bank level, the formal procedure is never as straight forward as one would expect.

We have had much success in the challenge of bad offers and getting the compensation for our clients. In the past, we have challenged Lloyds and other banks based upon bad offers and have been able to have them overturned in the customer’s favor. We have been able to obtain a £1,150,000 uplift for just one of our clients.

We have found that clients that seek out professional advice before they make a formal claim are able to get much better results and claims as opposed to making a claim by themselves.

How We Can Offer Assistance

We can offer you expert advice on mis sold complex financial products.

We will take the time to advise you on the strength or weakness of making a claim with no obligation. In addition, we work on a full no-win, no-fee basis, meaning there is no worry on your part and we will only take the claim if we believe it has a chance of success. If you feel as though you have been mislead or blatantly lied to by a bank, contact us today.