So What`s The Catch?

[711]

Fortress bonds, advertised here on Answerbank, offer interest on their fixed rate bonds way above anyone else, with FSCS cover for up to £50,000. So what`s the catch?

[Ouzel]

711 - if you're considering these bonds, please read this first :-

http://www.telegraph.co.uk/finance/personalfinance/savings/11065151/Concerns-over-safety-of-2.25pc-savings-bond.html

[New Judge]

The catch is that this is an investment product and not a cash deposit. The FSCS covers investors in these schemes up to £50k (as opposed to £85k for cash deposits). However, the eligibility for such compensation is not so straightforward. You cannot determine whether you are an “eligible investor” until the need for a claim arises. Then your claim will be considered on a case by case basis. In other words, your cover is not guaranteed as it is with cash deposits.

Castle Trust (which sells the Fortress Bonds) suggest they have obtained opinion from a QC who has confirmed that:

"...all the criteria to trigger the benefit of FSCS protection have been met provided that you are an eligible investor (see below)."

"Below" it says this:

“The eligibility of claimants is determined on a case by case basis. Claimants are eligible unless they are excluded as detailed by the rules set out in the FCA Handbook. Private individuals, small companies, beneficiaries of trusts and SIPP investors are generally eligible.”

In short, you are taking a higher risk to get the better returns.

This explains all:

https://www.castletrust.co.uk/fscs/

[New Judge]

Yes and most tellingly, at the foot of its Homepage, Castle trust puts this (in fairly small print):

"You risk losing capital should Castle Trust become insolvent."

[711]

Thanks folks - they`re all best answers!