Structured deposits - a glossary

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.

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.

ISIN

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 last day of the structured deposit’s Term and is usually the date on which any Return paid by the structured deposit is calculated.

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.

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 .