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How can I protect my L&G Portfolio Bond?

Financial Advice | General Helpful? 6

Asked by jimford, submitted 29 May 2013.

Open Quote I have a portfolio bond with L&G and I have had it for 6 years. I take a 5% monthly amount from it and it has held up reasonably well (except for the first few years of the recession). I firmly believe that this country is going to implode soon because of the debt it has accrued and the ever growing welfare and NHS costs. When this happens I am frightened of losing my money as I think this will be worse than the banking collapse of a few years ago. What can I do to protect my cash?End Quote

Answered by Justin on 13 August 2013

There are two different levels of safety to consider: the safety of your underlying investment(s) within the bond and the safety of Legal & General themselves.

If markets dive then the value of your investment fund(s) within the bond will likely also fall if they are invested in stock markets. You can protect against this by switching the fund(s) into less risky funds, the lowest risk probably being funds that simply invest in cash (although these are not necessarily 100% safe). The issue with this is that returns may be low (especially in the case of cash) meaning you could lose out if markets don't dive. It's a very tough decision to make!

It should be possible to switch funds within your bond, although if you currently invest in a with-profits fund bear in mind there may be a market value reduction to switch out of it - certainly something to check if applicable.

If one of these funds collapses because something untoward has happened (i.e. someone's run off with your money) then you won't benefit from any Financial Services Compensation Scheme (FSCS) cover if the fund was run by an external fund manager. Otherwise you'll get 90% cover if the fund is run by L&G. In any case, there is no compensation for losses simply caused by falling markets.

The other issue is the unlikely event that a crisis sends L&G into bankruptcy. If L&G is unable to repay your investment bond then your loss would normally be covered by the FSCS for 90% of the bond value.

Please note this answer does not constitute a recommendation or financial advice and should not be relied upon when making specific investment or other financial decisions. You should always undertake your own research into whether a product or service is appropriate for your needs and, if necessary, use a qualified professional adviser.

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