I am not happy with my small self-administered pension scheme (SSAS) held by Bank of Scotland, earning 0.1% interest. I am being advised to consider the ARM Assured Income Plan, an asset-backed bond with five, seven and 10-year investment periods. I am 70 years old.
Over 10 years, the return is 10% a year, so after that time, £100,000 should have paid £100,000 interest and return the original £100,000. Rockingham Retirement has done a deal with the bond promoters, Catalyst Investment Group, to pay 10.25% a year over 10 years.
The plan is based on US "whole life" insurance policies, which do not pay until the death of the person whose life was originally insured. If holders need cash, however, they can sell on the open market to investors such as the company issuing this bond. They keep paying the premiums until the policyholder dies and then collect the insured sum. This is apparently very profitable. However, I believe that if something sounds too good to be true, it probably is. What do you think? - TPG, by e-mail
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First, due credit. Catalyst says: "Participation in the Assured Income Plan may involve substantial risks and is suitable only for investors who have the knowledge and experience in financial and business matters necessary to enable them to evaluate the risks, tax implications and merits of such an investment."
Those are formidable requirements, which should instantly exclude at least 95% of the UK population. And because the scheme is US-based, it is not regulated by the Financial Services Authority so, if the bond issuer defaults, investors cannot turn to the Financial Services Compensation Scheme.
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The bigger question is whether a 70-year-old should be gambling on the deaths of strangers living 3,000 miles away in a different currency, tax and legal regime.
Many of us are living longer than expected, delaying the returns from such ghoulish schemes. Meanwhile there is little income, despite the promise of quarterly payments. Some will come from interest on the fund's cash but the rest comes from distributing profit - a much riskier proposition. Catalyst says: "No assurance can be given that the issuer will succeed in meeting its investment objective or that assessments of the short-term or long-term prospects, volatility and correlation of the types of investments referred to will prove accurate."
The bonds are issued by ARM Asset-backed Securities, a Luxembourg company with a share listing in Dublin. An unspecified and unlimited amount of investors' money is siphoned off in fees to at least a dozen different agents, from administrators to brokers. And as the policies are American, you are also gambling on the dollar maintaining its value against the pound
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It gets riskier by the minute - fine for a speculator, or an investor with a diverse portfolio, but for someone of your age to invest pension money in this plan is simply asking for trouble.
Rowanmoor Pensions is offering a one-year deposit paying from 3% for £50,000 to 3.75% for £1m for cash in SSAS and self-invested personal pensions (Sipps). That looks a more sensible home for your money.
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I have two mortgages on my property, a £44,000 repayment and a £44,000 interest-only, both on a tracker at 0.29 percentage points above Bank rate. As the Bank rate has come down, I have left my payments the same and overpaid the interest-only mortgage as my endowment policy is forecast to pay only about £30,000. I thought it would be sensible to reduce the sum as my endowment comes to fruition in five years and I don't want to be left with a debt.
Am I doing the right thing or would I be better off overpaying the repayment mortgage as the payments are considerably higher? I assume this would reduce the sum and allow me to pay the mortgage off quicker in the long run, as this still has 15 years to run.
I'm in the Fire Service and retire in three years. I will receive a £90,000 lump sum, which I could use to pay the debt but I'd rather overpay now and enjoy or invest the lump sum - TP, by e-mail
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You are doing the right thing on both counts - maintaining your payments, and concentrating on the interest-only mortgage. The monthly payment is larger on the repayment element because you are paying off some capital each month in addition to the interest. As you reduce the capital balance through the term of the mortgage, the total amount of interest paid over the life of the loan will be less than on the interest-only element, where interest is charged on the full balance throughout.
However, Ray Boulger at John Charcol, the mortgage broker, points out that if your mortgage rate remains 0.29 points above Bank rate, you could invest the extra cash in an account paying more, such as ING Direct's 2.75% gross (2.20% after 20% tax).
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