Structured Products

What is a structured product?

A structured product is a kind of fixed-term investment whose payout depends on the performance of something else, like a stock market index. There are two main types of structured product:

Structured deposits – Structured deposits are savings accounts, offered from time to time by some banks, building societies and National Savings & Investments, where the rate of interest you get depends on how the stock market index or other measure performs. If the stock market index falls, you will usually get no interest at all. But – unlike structured investments (see below) the money you originally invest has the same protection as you get with any other savings account.

Structured investments – Structured investments are commonly offered by insurance companies and banks. Your money typically buys two underlying investments, one to protect your capital and another to provide the bonus. The return you get depends on how the stock market index or other measure performs. In addition, if it performs badly or the firms providing the underlying investments fail, you may lose some or all of your original investment.

Structured investments and deposits are sold under many different names, including:

  • Guaranteed Equity Bonds
  • Structured Cash ISAs
  • Growth Deposit plans
  • Guaranteed Capital Plans
  • Guaranteed Stockmarket Bonds
  • Protected Investment Funds
  • Guaranteed Income Bonds

The word ‘guaranteed’ in these product names may not mean what you think. You are guaranteed to get the returns offered only if the index or investment performs as required in the product’s terms and conditions. Your capital is guaranteed only if the company providing the guarantee can meet its obligations or is covered by the Financial Services Compensation Scheme. Even when your capital is guaranteed fees and charges may mean you get back less than you put in.