Quick variations on the BES loan-back theme: Building societies have added more get-out options to new schemes, writes Neasa MacErlean
Saturday 06 March 1993
Bristol & West's Bessa was hailed as an ingenious breakthrough when it was launched two weeks ago with a six-month get- out. But it is only now reaching its pounds 45m target. Two weeks is a long time in the current BES world.
The Bristol & West scheme is now regarded as outdated compared with newer launches that allow investors to bail out at one, two or three years as well as the six-month option.
The two main sponsors of BES schemes have opposing views of the development of the market. Close Brothers, sponsor of the Bristol & West scheme, believes most investors want to take out their funds after six months through the new 'loan-back' schemes. On its newest BES scheme - providing accommodation for students at Newnham College, Cambridge - it has arranged a 75p loan-back after six months for each gross pounds 1 invested.
Combined with the 40p tax refund for higher-rate taxpayers, the annualised return is slightly more than 32 per cent. (None of these schemes are suitable for 25 per cent taxpayers, who would earn far better rates elsewhere.)
The offer of a 75p return is competitive. However, this is bettered by a Corpus Christi BES issue, which plans a 76p six-month loan-back.
Johnson Fry, Close Brothers' main competitor, is taking a different tack. It is only offering a 74p six-month loan-back, on the assumption that investors will exercise their exit options at a later date. It is 'advising investors to consider not taking the six-month loan unless they need to take their profit as soon as possible'.
Johnson Fry is sponsoring BES issues from Portman, Leeds Permanent and National & Provincial building societies next week. It is also arranging for the surplus demand of pounds 19m on the recent Bradford & Bingley issue to be taken up by Leeds & Holbeck and Norwich & Peterborough. The minimum investment is pounds 3,000.
All these schemes will offer loan-backs of 78.31p after a year, 87.71p after two years and 98.24p after three years. Investors who take out a loan-back option will still be eligible for a 50 per cent share in any profits the schemes earn above pounds 1.23 per share over the full five-year BES period.
Britannia Building Society's similar pounds 50m scheme offers 75 per cent of the excess profits to investors.
The Johnson Fry philosophy assumes that the Chancellor, Norman Lamont, will not decide to forbid the exercise of the loan- back option after the BES regime finishes at the end of the year. The Close Brothers approach could cope with such a change.
Allenbridge Group, a BES adviser, is enthusiastic about the new building society deals with a range of loan-back options. If the Chancellor does not alter the BES rules in the Budget, investors will probably want to exercise their loan-back options in six months and then reinvest in a fuller-term BES issue. But the multi-option schemes cater for the possibility of a changed market in six months' time.
Next week many BES investors may be attracted to the National Westminster pounds 25m issue to buy the homes of NatWest staff who have to relocate. This scheme offers a 74p loan-back after six months or a pounds 1.08 guaranteed return in five years' time.
By contrast, Lloyds Bank is backing a Barratt Homes BES issue renting out new properties. It offers a pounds 1.15 return in five years.
World's most lethal spider found under a bunch of bananas
Rumours that the star wants to move on to pastures new
Comedian says he 'never laughed as hard as I have writing with Rik'
17 October 2014 07:08 PM
Going down the wrong road: parking fines are nudging people into debt difficulties
17 October 2014 07:58 PM
Stacks of income: Drax is among the companies in Neil Woodford’s portfolio that he believes will pay strong dividends
17 October 2014 07:23 PM
Don't panic, it’s a wise idea to check investments regularly to ensure they are on target for your hoped-for returns
17 October 2014 09:18 PM
With little or no wage growth being seen in the UK, increasing house-price inflation could see the number of first-time buyers slide further, unless there’s a new accelerated house building programme
17 October 2014 07:19 PM
You should ignore the headline offers and trickery and work out the total cost of borrowing under different deals
17 October 2014 07:24 PM
Denise Leigh, who appeared in a production of Rigoletto with Alan Opie, was left without an essential service
10 October 2014 06:13 PM
A charity has calculated the cost to us all of unmanageable debt – from lost productivity to the extra demands on the NHS
10 October 2014 06:36 PM
The regulators are at last tackling the high-profile payday lenders, but they appear to be ignoring the growing problem of internet loan firms
10 October 2014 06:35 PM
As the cold weather hits, the question of soaring bills will be felt by each of us at home
10 October 2014 06:55 PM
Nikki Galloway (above) sells jewellery via her own website as well as on Facebook, Amazon and Bouf
10 October 2014 07:17 PM
Queenstown on Lake Wakatipu in New Zealand. The country’s stock market was boosted last month on John Key’s re-election
10 October 2014 07:29 PM
Royal Mail is cutting its small parcel charges from 20 October
03 October 2014 07:08 PM
Anyone who moved to countries including Australia, Canada, South Africa and a 100 other places, have had their pensions frozen at the rate it was paid at when they left the country
03 October 2014 06:52 PM
Every fund has good years and bad, but consistent underperformance over a number of years points to something more fundamental
03 October 2014 07:38 PM
Nick Train thinks luxury fashion brand Burberry is one of the companies that has prospered in digital marketing
The HiFX guide to international money transfers
Mark Dampier: Woodford’s young companies could be the stars of the future
Money Insider: Help to Buy must be boosted by building
Ticking time bomb: Interest rate rises are coming, so start preparing now
Weekly Money: Round-up of the personal finance stories you may have missed 13-17 October
- 1 Jack the Ripper: Scientists who claims to have identified notorious killer has 'made serious DNA error'
- 2 Ebola outbreak: What is bushmeat – and is it to blame for the disease that has killed thousands?
- 3 Star Wars memorabilia called a 'bit of plastic' by Antiques Roadshow's Fiona Bruce valued at £50,000
- 4 Meet Thea, Norway's 12-year-old child bride
- 5 Russell Brand might seem like a sexy revolutionary worth getting behind, but he will only fail his fans
Cameron is warned 'no possibility' of UK reducing immigration and that bid to bring in quota on migrant workers would be illegal
Sorry Judy Finnigan – Ched Evans is no less sickening than an alleyway rapist
Residents should throw a street party and mix with immigrant neighbours, councils told
Workers 'could be forced to pay £5 a week' to get benefits
Russell Brand threatened with arrest after filming outside Fox News headquarters
Amal Alamuddin calls for the return of the Elgin Marbles from Britain: 'Injustice has persisted for too long'
iJobs Money & Business
£60,000 - £80,000: Saxton Leigh: Our client is an leading Asset Manager based...
£27000 - £32000 Per Annum: Clearwater People Solutions Ltd: Our large charity ...
£50000 - £55000 per annum + bonus + benefits: Ashdown Group: IT Relationship M...
Highly Attractive Salary : Austen Lloyd: NOTTINGHAM - BRILLIANT FIRM - You wil...
Day In a Page
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village