On the face of it, this looks like a relatively clever and attractive savings product for which there should be a quite considerable demand, but actually it's not that at all. Certainly, it won't change the face of the British savings market, nor is it likely to make any impact on Barclays' profits. There is already a plethora of "guaranteed" products on the market. This one doesn't look so different from the rest of them. If anything, the likely returns are less generous. As for the marketing blurb that accompanied the launch, some of it is positively insulting for anyone who knows about these things.
Take this. The press release tells us that the 4 million people in Britain with more than pounds 1,000 in a restricted-access savings account would have earnt 10 times as much on their money last year by sticking it in the stock market than by leaving it where it was. Well strike a light! We'd all be rich by now if we'd known the stock market was going to rise by as much as it has.
It's easy to mock, isn't it, and despite the hype, Barclays may be tapping into a real demand here. This is similar to the demand that has swelled the American mutuals to such extraordinary levels in recent years - the slow dawning realisation by Jo Six-pack that since his money won't earn much in the way of interest any longer he ought to stick it into the soaraway stock market, where returns of 20 per cent per annum are now a dead cert, aren't they?
There in lies the rub. By our calculations, the market needs to rise quite dramatically to yield a return on this account which is significantly higher than a traditional long-term savings account. The b2 account plays on fear of the bear by guaranteeing your original capital, but you would still lose out badly in real terms if the market failed to make headway during the lifetime of the product. Moreover, the risk of that happening scarcely justifies the relatively high management and hedging costs of the account. In most cases, equity investors would do better to stick their money in a traditional tracker fund.