Monthly income from ISAs?
Discussion
I’m trying to avoid drifting into higher rate tax, so am looking to supplement income from cash ISAs, I’ve been pointed in the direction of a plan that guarantees capital and pays 0.5% a month, but only if 2 stock indices are above 90% of the start date, which it may or may not be.
Any guidance on the best options?
TIA
Any guidance on the best options?
TIA
Yep, it's an example of a structured product called an autocallable.
These act as a wrapper for reasonably complex combinations of financial instruments (essentially a bond bolted to some funky options contracts) that seek to offer some mixture of equity returns and capital preservation, and are marketed to appeal to that psychology. The complexity enables the issuer to bake in various margins and fees that make them not great value for money, as the customer has no real way of being able to see/judge this for themselves. Then there is counterparty risk in that you're an unsecured creditor of the issuer.
The need that they address is real and fair but with most of these you're paying over the odds for a return profile that could be largely replicated DIY using a simple mix of index tracker(s) and bonds/fixed-term deposits.
These act as a wrapper for reasonably complex combinations of financial instruments (essentially a bond bolted to some funky options contracts) that seek to offer some mixture of equity returns and capital preservation, and are marketed to appeal to that psychology. The complexity enables the issuer to bake in various margins and fees that make them not great value for money, as the customer has no real way of being able to see/judge this for themselves. Then there is counterparty risk in that you're an unsecured creditor of the issuer.
The need that they address is real and fair but with most of these you're paying over the odds for a return profile that could be largely replicated DIY using a simple mix of index tracker(s) and bonds/fixed-term deposits.
Panamax said:
Bear in mind that "guaranteed capital" isn't a magic answer when inflation is gnawing away at 3% p.a.
Personally, I would keep things simple.
Yep, initially it was explained to me as a 5 year ISA paying 0.5% / month, which sounded like a reasonable deal (I’ve got investments and pensions tied up in funds so wanted to keep the ISAs in cash)Personally, I would keep things simple.
However, the terms don’t really make it terribly attractive.
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