Structured deposits are capital protected. This means they will return your initial deposit, regardless of the performance of the index that the structured deposit is linked to, and whether or not the structured deposit pays you a Return.
The exception to this is if the deposit taker becomes insolvent during the Term of your structured deposit. In this case you would need to rely on your FSCS depositors’ protection, as you would with any other deposit account.
This is the deadline for submitting your application form for an investment into a structured deposit.
This is the bank or building society that holds your money for the Term of the structured deposit. If the counterparty/deposit taker becomes insolvent during the Term, investors can get their money returned up to the protected maximum available under the Financial Services Compensation Scheme (FSCS).
Find out more about how structured deposits work.
This means the investment is made outside of an ISA wrapper or a self-invested personal pension (SIPP). Any interest earned will be liable for tax.
This is the last day of the structured deposit’s Term and is usually the date on which any Return paid by the structured deposit is calculated.
Structured deposits pay a return depending on the performance of an Underlying Index (for example, “this structured deposit will pay a Return of 30% after 6 years if the FTSE 100 has risen by 1 point or more over the 6 year Term”). The Underlying Index is the index that the Return of the structured deposit is linked to. Structured deposits are usually linked to well-known indices like the FTSE 100 Index. Occasionally, a structured deposit will be linked to something else (for example, an interest rate or a group of stocks), which would just be referred to as the Underlying .
Most structured deposits allow you to invest using your current year’s ISA allowance (commonly referred to as “New ISA money” or “Current Year ISA money”).
Most structured deposits also allow you to transfer in your previous years’ ISA money from other cash and stocks and shares ISAs you hold.
Because ISA transfers take time to complete, the deadline for submitting an application to transfer in your old ISA money is usually earlier than the deadline for Direct and New ISA money.
Please be aware that some ISAs may have an exit penalty if you transfer out.
This stands for the International Securities Identity Number. This number identifies specific investment products such as stocks, bonds and commercial paper and the securities contained within it.
Structured deposits normally have complicated names, so providers usually include an ISIN in the structured deposit’s brochure so that you can easily identify the structured deposit at a later date if you need to.
This commonly-used phrase is simply another way to say “this is what a structured deposit will pay you under these different circumstances”.
For example, a payoff profile could be articulated as:
“After the Term of 6 years, if the FTSE 100 has risen by 1 point or more, the structured deposit will pay you your initial deposit plus a Return of 30%. If the FTSE 100 has fallen after 6 years, the structured deposit will only return your initial deposit (and not additional Return)”
It could be more simply articulated as:
“If the FTSE 100 has risen after 6 years, return of 30%, otherwise return of initial deposit only”
Or it may even be articulated on a graph.
Different providers will describe their pay-off profiles in different ways. Providers that offer products to UK savers should be using simple and clear language when describing a pay-off profile.
Many structured deposits are called “Deposit Plans” and/or have the word “Plan” in the name (for example the “FTSE 100 Kick-Out Deposit Plan 93”).
Plan means the collection of services that the provider will give you when you invest in a structured deposit. The services usually included within a “Plan” are:
Whilst it is best practice to use the word “Plan” or “Deposit Plan”, different phrases are used, depending on who you’re speaking to.
In the context of structured deposits, “your Plan”, “your Deposit Plan”, “your product”, “your structured deposit”, “your investment” and “your deposit” all mean the same thing: the investment that you have made into a structured deposit.
Some structured deposits have a fixed term that they last for – i.e. 6 years.
However, the most popular type of structured deposit in the UK over the last 10 years has been the “kick-out” structured deposit.
Kick-outs have a maximum term (i.e. 6 years), however then can also mature early if certain conditions are met. A Kick-out structured deposit typically features an opportunity to mature on each anniversary, if the Underlying Index (i.e. the FTSE 100) has already risen by that date.
Kick-outs usually quote their Return in “per annum” terms – so your return will reflect how long the structured deposit has been in force when it matures.
The benefits of a Kick-out over a fixed term structured deposit is that they’re generally more likely you pay you a Return, as there are more opportunities for the Underlying Index to meet the conditions of the product (i.e. “has risen since the start date”).
The drawbacks of a Kick-out structured deposit is that the Return on offer is usually lower than that of a fixed term structured deposit (because it’s more likely you will achieve that Return). Furthermore, when you invest in a kick-out structured deposit you can’t be sure when your investment will mature – for example, it could mature after 3, 4, 5 or 6 years, depending on how the Underlying Index performs.
This is the amount of interest your deposit will earn if the conditions of the structured deposit are met. Some structured deposits offer a Return on the Maturity Date, some offer smaller Returns throughout the Term of the structured deposit, some offer a minimum Return as well as the potential for a larger Return if the Underlying Index performs in a certain way.
Structured deposit providers don’t usually use the word “interest” as it is associated with the “guaranteed” interest rates of fixed term deposits. For this reason, structured deposit providers usually use the word “Return”.
However, “interest” and “Return” both mean the same thing in the context of structured deposits; the money that you will potentially receive on top of your initial deposit.
This is the first day of the Term of the structured deposit, and crucially the date on which the starting level of the Underlying Index is recorded.
This is the maximum time period that structured deposit will run for.
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