Building societies letting down cautious consumersWhich? research shows poor performing investments

27 November 2010

Danger logo

Structured products aren't always as safe as they seem

Six major UK building societies have been selling an investment product that has never achieved the maximum advertised returns for thousands of investors, according to new Which? research.

The Protected Capital Account – sold by Barnsley, Cambridge, Chelsea, Leeds, Saffron and Yorkshire Building Societies (and until recently Stroud & Swindon) – was designed by Credit Suisse and claims to offer ‘60% potential maximum growth at maturity’ after six years. However, when Which? back-tested the product, we discovered that at no time in the last 25 years would the investment have achieved the maximum return.

Other problems with the Protected Capital Account

The product - known as a structured deposit product - also included exit fees that, Which? believes, could unfairly penalise investors who need to get their money back before the maturity period. These fees are not made clear to investors and seemingly left to the discretion of the product provider.

In light of the Which? research, Credit Suisse has agreed to review its product and the way it is marketed. Both Credit Suisse and the six building societies accepted that they had not carried out any consumer testing of the literature before selling the product.

What will Credit Suisse be doing?

Credit Suisse told Which? it takes its responsibility as a provider of investment products very seriously. It said it would now examine the possibility of waiving exit penalties in the event of death; would consider the more widespread use of annual interest rates in promotional materials; and would look at other ways to improve the way the product is sold.

Coventry Building Society, which now owns Stroud & Swindon (S&S), said that S&S branches would no linger be selling the Credit Suisse product. It said it would write to customers to ensure they’re happy with their investment.

For more on these types of structured products, check out the December 2010 edition of Which? Money (get 2 trial issues for just £2) or read more online in our free guide to structured products. 

pound coins

Which? Money when you need it

You can follow @WhichMoney on Twitter to keep up-to-date with our Best Rates and Recommended Provider product and service reviews.

Sign up for the latest money news, best rates and recommended providers in your newsletter every Friday.

Or for money-saving tips, and news of how what's going on in the world of finance affects you, join Melanie Dowding and James Daley for the Which? Money weekly money podcast

For daily consumer news, subscribe to the Which? news RSS feed here. And to find out how we work for you on money issues, visit our personal finance campaigns pages.