Thanks again to all for the additional thoughts, knowledge and advice. When I realise the funds I expect, if it doesn’t go immediately into helping a son buy a house and/or helping finance a house move of my own, I shall indeed be avoiding any possibility of a scam, the information and advice helping me do that.
Hopefully the same info might help others, too.
Can I suggest being mindful of your tax and IHT position if you assist your son. I’m seeing so many adverts nowadays (esp equity release) which highlight this potential benefit/action but it may not be straightforward and needs consideration IMV.
I admire you, Revvie, if you look after your own financial affairs and investments.
I hope that you will agree that this is a very specialist area, and that people without extensive background knowledge should generally avoid this, and seek expert advice.
The financial markets are a dog-eat-dog environment, and dreadful stories are heard every so often of people losing their savings virtually overnight.
Thanks for the thought re tax and inheritance. Our jurisdiction is actually outside UK with its own laws and doesn’t have capital gains, gift or inheritance tax so not an issue, however I am aware of them and if we move back some time I’d take care how it’s done.
Generally yes, but IB has had fingers burned by previous “advisors” and seemed attracted to unsolicited investments.
A diy approach through a recognised platform should remove the risk of being scammed. Also, they tend to have ready made beginner funds available, often low cost and maybe passive.
We will have to disagree.
The risk is too great and, if the money in the care of financial advisers 'disappears, it will never come back…
There are some excellent financial advisers around. I could name a couple, but I don’t want to breach Forum rules and I won’t get into an area of investment advice.
Actually not attracted to, but (as the riskiest of these things do) it came at a time of considering what to do when a house sale completes, and on paper a government bond to provide additional funding for the NHS is entirely plausible, and 6% for a 5 year bond when interest rates are headed that way seems only a little high (a bone fide bank we use is offering 4.3% for a 2-year fixed bond). That of course is how the scammers catch their prey - but the alarm bells started ringing, hence my starting this thread.
If the offer is “too good to be true”, be reassured that it is a scam.
These people prey on peoples “greed”, not being able to resist the high return of their investments.
Your hard earned money will go straight into the pocket of the scammer!
To expand on what’s been said about bond valuations and their mechanisms above and be 100% clear, the interest yield on the gilt cited (per the ISIN) isn’t 6% based off its latest (traded) market price. The 6% cited is what’s called a ‘coupon’ (from the days when bond certificates were issued with tear-off coupons around the edge of the certificate, which were then presented to the issuer/their agent to get the interest return – atypically every 6m’s). Some legacy bonds are lithographic treats for the eyes.
The 6% is the interest return on the nominal value of the bond i.e. for a bond of nominal £100, it pays 6% or £6. If the market rate of interest is say 12% and a bond’s coupon is 6%, then it’s unlikely anyone would pay say £100 to get a £6 interest return – they would go elsewhere. To get a 12% return they would pay only (say) £50 for a nominal £100 bond, which would deliver £6 of coupon interest. BUT – this is only one component of bond pricing, another being the ‘yield to maturity’ (redemption) e.g. if the £100 bond is maturing in 2023 (12m’s from now) and market rate of interest is say 12%, your overall return will also include capital gain to redemption – so, in simple workings, you might pay £94 to hold a £100 nominal value bond with the coupon delivering £6 p.a. of coupon interest and the capital gain to maturity £6 = 12% return.
Inversely, if the coupon return is above current market rate, then a bond may be priced above its nominal value, effectively any capital loss if it were held to maturity being compensated for by the above-market coupon.
The above is a highly simplified explanation as things like perceived credit risk and other applied risks play through a bond’s pricing.
Buying low-yielding coupon short-dated gilts (below market interest rates) used to be a popular way of managing tax obligations where a person wanted to book/declare more capital gains than interest, as the gilts were heavily discounted to their nominal value so as to deliver an equivalent market return i.e. the coupon yield was low, this treated as income, the redemption gain being booked against CGT allowances.
I knew nothing about bonds, other than that they were something you can buy, or buy into, and get a return for your money.i just assumed it was equivalent to putting money into a bank or building society fixed term account. Your explanation clarifies and has educated me - thank you
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I suspect this is an issue many people come across, it’s that word ‘bond’. It gets slapped on anything from a bank account, through a decades long commercial loan to an overseas ‘structured’ investment which turns out to be anything but.
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