Breaking the bond

By THIS IS MONEY
Updated:

 

WE have a poor performing Prudential bond for our child. Where should we reinvest the £3,000 capital plus £50 extra? J, Potton.

Darius McDermott, at independent financial advisers Chelsea Financial services says: There will be no penalties for cashing in the bond on its fifth anniversary but be aware that MVAs (market value adjustments) are still in place due to the poor performance of the market during the past three years.

These can vary between 5 and 15% of the value of the bond, so cashing in now could further affect its value.

Prudential is still a very strong insurer and we suggest holding on to the bond at least until the MVA comes down further.

If you are determined to cash in and you have already used your ISA allowances for this year, consider investing in a unit trust or investment trust.

You can invest the lump sum of £3,000 and make further monthly top-ups of £50. You can invest in your name but register the investment to your child.

Consider funds such as New Star Higher Income, Rathbone Income and Invesco Perpetual High Income.

If you want to avoid the risk of share-based investments, consider a simple savings account, such as ING Direct (UK), which currently pays 4.02%.

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