Reader questions: Is my fixed-rate bond an unregulated mini-bond?
The word “bond” can mean many things. Some are perfectly safe, others have no guarantees, regulation or compensation if things go wrong
Pete writes: “I have a concern after reading your recent column regarding mini-bonds. I invested in a fixed-rate bond with Charter Savings Bank some years ago. Is this a mini-bond? Should I be concerned?”
I understand your puzzlement, Pete. The word “bond” can mean many things. Some are perfectly safe — like the fixed-rate bond you took out from a bank.
It’s essentially just a deposit account that you cannot access for a set period of between one and five years. As with any bank deposit, it’s fully protected up to £85,000 per person in that institution.
National Savings & Investments also issue bonds that are completely safe up to any amount.
Corporate bonds are loans to a company. They are not safe. If the company goes bust, you may lose your money.
However, if they are bought in a fund, they are protected up to £50,000 (rising to £85,000 from 1 April). Mini-bonds — which I warned against in a column last month — are the riskiest of all. There are no guarantees, no regulation, and no compensation if things go horribly wrong, as they often do.
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