# Any advice on Ulster Bank Index Combination Bond?



## Ris (16 Feb 2011)

Hope this is the right Forum!

Does anyone have any advice on whether the Ulster Bank Index Combination Bond is a good investment? I have about €30k to invest and I wanted to move it to Ulster Bank anyway for more security, i.e. I understand their money comes under the UK guarantee scheme in addition to the Government Guarantee Scheme.

It seems like a very good return after six years but Im not used to investing so it would be great if anyone had any insights on this?

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## Brendan Burgess (16 Feb 2011)

I have no first hand experience of this product, but in general, these tracker bonds are not a good idea. Check out the many posts on tracker bonds.


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## Ris (16 Feb 2011)

Many thanks for the reply. I will check that out


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## Jim2007 (16 Feb 2011)

In addition to Brendan's comments, I would point out that although the word 'deposit' is used frequently throughout the documentation, this is in fact a product and as such I doubt that it would fall into the guarantee scheme.... if this is an important concern of yours, then you'd need to check the issue out.

Jim.


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## hibernian (12 Mar 2011)

Hi all. I have a lump sum to save and had considered putting half of it in Ulster Banks 1 year deposit account and half in this combination bond. Getting some money back after a year at a rate of 10% (in the case of the 4 year bond) with the prospect for good returns on the balance is appealing. However, I dont like the fact that the 4 year potential rate of return is capped at 18% and conveniently, nothing was mentioned to me about the bond falling outside of the state quarantee. As the safety of my money is my priority am I best to just put it all it the 1 year account at 3.5%?


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## SpottieOttie (21 Mar 2011)

*Ulster bank index combination bond*



Jim2007 said:


> ... although the word 'deposit' is used frequently throughout the documentation, this is in fact a product and as such I doubt that it would fall into the guarantee scheme....


 


hibernian said:


> ... nothing was mentioned to me about the bond falling outside of the state quarantee...


 
Hi, I picked up a brochure for this in o'connell street branch, and it says _"We will invest your funds in an Account with the Bank in your name(s)."_ If this is true, then I would have thought the account would be covered by the deposit guarantee scheme. Appreciate it's a complex area, but this much seems self-explanatory. Good luck getting the teller (or the bank manager for that matter!) to explain deposit protection to you.

Also, the brochure says _"€0 or 0% will be taken in charges"_ - last time I checked, Ulster Bank was a bank, not a charity. Anyone know how they can get away with saying this, or if boi/aib are doing the same thing? Surely they get their cut from somewhere?


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## Brendan Burgess (22 Mar 2011)

OK, I got the actual brochure and I am not happy with it. 

We will deal with the 4 year option, but the same applies to the 6 year option.  I cannot find this on their website and I think that they are obliged to show this under the CPC. 



> *Where does my Investment Go? *
> 80% will be used to secure the promised payment of €8,000 payable after 4 years. This is equivalent to a promised return of 0%....
> 
> 20% will be used (for the 10% return bit)
> ...



I complained Bespoke Investments to the Financial Regulator for a similar disclosure which I consider to be misleading. They have changed their brochure since.

This Ulster Bank brochure is not in compliance with the CPC as it does not disclose the cost of the option.


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## Brendan Burgess (22 Mar 2011)

I will raise this disclosure directly with Ulster Bank, but in the meantime, this too looks like a terrible product. 

Because they don't tell you the cost of the option, you can't really assess the product. 

It seems to me that you would be far better off putting your money on one year fixed with Ulster Bank and you will get 3.5%. At the end of the first year, it is likely that interest rates will have risen and you will get more than 3.5%.

This product gives you a return of either 
0% 
or 
4.22%

Let's say you get 4.22% on 80% of your money. How much does the 10% for year 1 add?  Is this calculation correct?

20% x 12 months = 240@ 10 = 2400
80x 48 months = 3840 @4.22=16204
                        total= 4080 @ x =18604

x, the true CAR on this product would be 4.56%

So you have a choice of 3.5% which is likely to rise 

or a choice of either 0.3 % or 4.56%

Given that the Combination Bond is inaccessible for 4 years, the deposit rate is much more attractive.

Brendan


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## Brendan Burgess (22 Mar 2011)

Just to clarify one point. I am not recommending Ulster Bank for deposits and they rarely appear on the Best Buy table. 

I use Ulster Bank's own rates to make sure that there is no complication in terms of the safety of the deposit. 

An Ulster Bank deposit is clearly better than this terrible product. 

You can then shop around to see if a deposit with some other bank is better than Ulster's offering.

Brendan


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## Brendan Burgess (22 Mar 2011)

This is also in clear breach of their own much vaunted 

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## PMU (22 Mar 2011)

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SpottieOttie said:


> Hi, I picked up a brochure for this in o'connell street branch, and it says _"We will invest your funds in an Account with the Bank in your name(s)."_ If this is true, then I would have thought the account would be covered by the deposit guarantee scheme. Appreciate it's a complex area, but this much seems self-explanatory. Good luck getting the teller (or the bank manager for that matter!) to explain deposit protection to you.



I don’t think it’s all that “self-explanatory”.

The Deposit Guarantee Scheme is set up by the European Communities (Deposit Guarantee Schemes) Regulations 1995 (S.I. No. 168/1995) as amended by S.I. No. 228/2009. These put into operation in Ireland the EU Directive on Deposit Guarantee Schemes (94/19/EC). The scheme protects “eligible deposits” in authorized financial institutions. In effect it covers 100% of an individual’s deposit to €100,000 per institution in current accounts; demand deposit accounts and term deposit accounts with (authorized) banks, building societies and credit unions; building society share accounts; and share and deposit accounts in credit unions. The DGS is administered by the Central Bank and Financial Services Authority of Ireland and you can find out more at [broken link removed]

There is a separate Credit Institutions (Eligible Liabilities Guarantee) Scheme 2009. This guarantees on-demand deposits with a balance in excess of €100,000 up to 30 June 2011 (extended subject to EU approval to 31 December 2011) and deposits in excess of €100,000 for a fixed term of up to five years if made before that date. The deposit must be with a participating financial institution. The ELG is administered by the NTMA. You can find out more at [broken link removed]

[I also made a post here http://www.askaboutmoney.com/showthread.php?t=151598 on the provisions of the ELG concerning bonds (i.e. debt securities).]

The DGS does not cover all deposits, e.g. it does not cover deposits by financial institutions; deposits by insurance companies; deposits by collective investment schemes, etc. 

So you would need to check if a deposit of “_your funds in an Account with the Bank in your name(s)” _is a deposit under the DGS or the ELS where the deposit is made by not by you but by a financial institution. 

As the guarantee schemes are complex, it would be prudent wherever ‘guaranteed’ appears, to get the financial institution to confirm if the deposit is guaranteed under the DGS or the ELS and if not to ask exactly what ‘guarantee’ means and what is the counterparty risk.

 [/FONT]


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## hibernian (22 Mar 2011)

Thanks for all the helpful posts. I decided to go with the 3.5% deposit account option. Your example above Brendan confirms my suspicion that I may actually be better of interest wise, without the need to tie my money in for 4 years.


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