Nationwide Guaranteed Savings Bond: where’s the catch?

Nationwide Building Society has announced the launch of an exclusive Guaranteed Combination Plan. By taking out a Guaranteed Savings Bond (GSB) and a Guaranteed Equity Bond (GEB) together, savers can access a high interest rate of 4%, fixed for 12 months.

However, there is a minimum investment of £3,000 required, and savers can only access the deal if they take out a Guaranteed Equity Bond at the same time, which requires a six year commitment and also requires a minimum investments of £3,000. During those six years, customers cannot touch the money invested in the GEB.

Further, the a new Guaranteed Equity Bond is linked to stock market growth but the return is limited to 50% of the original investment at the end of six years. This means that while the maximum potential growth sounds juicy at 6.99% AER, if the stock market performs better, the providers of the GEB, Legal & General, simply keep the additional profit.

Robin Bailey, Nationwide’s divisional director for investments, stressed that the GEB investment is protected, which means if stock markets go down, the return at the end of the six year period will still be at least equal to the original sum invested.

Mr. Bailey said:

“We are always looking at ways in which we can help our customers make the most of their money, so we have taken the decision to return part of the revenue we receive from Legal & General when we sell their Guaranteed Equity Bonds to enhance the return on the Guaranteed Savings Bond. This way, we’re offering competitive rates without risking their capital. Interest rates are at a historic low and we have a duty to balance the needs of both our borrowers and savers.”

If you are considering taking this deal in order to access to 4% offered on the GSB, it might be time to think again. With the recent competition that has been hotting up in the savings market, there are other deals to be had that ask for much less commitment that the Nationwide deal. For example, the HiSAVE Fixed Rate Account offers an AER of 3.75% on a one year fixed deal, and requires a minimum investment of just £1,000.

To compare great deals on bonds, ISAs and regular savings accounts from top UK banks, just visit http://www.totallymoney.com/banking/.