Tracker Bonds and the Deposit Guarantee

[Brendan Burgess]

What is the story on guarantees for tracker bonds?

Are they all different?


Mercury Wealth Management have an ad in today's Irish Times for their Secure World Growth Bond.

The small print says "Deposits with KBC Bank Ireland plc are covered under the terms of the Deposit Guarantee Scheme".

The current generous scheme may well not be around when the bond matures in 5 years.

This article claims that customers of Bank of Ireland would have to pay 3.5% per year to get insurance on the New Ireland Secure Advantage Fund.

Brendan

 

[z109]

According to itsyourmoney, a tracker bond is covered under the Investor Compensation Scheme:
http://www.itsyourmoney.ie/index.jsp?pID=662&nID=757

The ICCL (Investor Compensation Company Limited) website says:
http://www.investorcompensation.ie/scope.php

There are limits to the amounts we may pay in compensation. We can pay only 90% of the amount lost, subject to a maximum of €20,000, to each investor.

Whether this is out of date or not, I don't know, but I haven't heard of an extension of the deposit protection scheme new limites (100% of 100,000) to the Investor scheme.

It appears to me that MWM are attempting to conflate their tracker bond and a standard deposit by the insertion of that small print and that this is misleading advertising. But, I am no expert in these matters...

 

[LDFerguson]

I don't have an agency to sell Mercury products so this is not a professional opinion, but a look at the [broken link removed] suggests that the monies are held on deposit with KBC for the full duration of the investment and as such, would presumably be covered by the Deposit Guarantee Scheme.

 

[z109]

If that is the case, it may qualify, but I suppose it depends how the accounts are set up? (As an individual or on behalf of MWM (so a corporate deposit)).

I also note from the small print, that the exit tax of the product is DIRT. This makes the product a poor on for a higher rate self-employed tax payer as I think it means you will pay the higher rate in your annual return plus PRSI. No?