How Much Should I Deposit in Investment Bonds?

Ian Lewis[1]

Ian Lewis

Money Savings Advice How Much Should I Deposit in Investment Bonds?

If you’re considering putting your money into Investment Bonds, then you might be wondering how much to invest in the first place.

Investment Bonds are classed as a lump sum-product, which means that you commit to paying upfront and investing all your money at once. You can’t add money later, so whatever you invest at the start is what stays in your account.

Several different factors will determine the amount you deposit into Investment Bonds. Your own financial situation is obviously important, but you’ll also be limited by what each provider accepts. Providers will have their own minimum and maximum limits for Investment Bond deposits.

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Accepted Investment Amounts

Most providers will have minimum limits of either £5,000 or £10,000. You’ll need to deposit at least the minimum accepted amount to open your account.

Maximum deposits can vary a lot from one provider to another. Some providers have no maximum limits, while others might set limits between £150k and £250k.

The minimum accepted Investment Bond deposit can sometimes be lower than the standard limits of £5,000 to £10,000. Some providers will even accept deposits of £500. If you don’t have a significant amount of spare cash, you might be able to search for a provider with this lower limit.

Is Your Money for Investment Bonds Genuinely Spare?

It’s easy to assume that money in your account is going spare if you’re not using it for bills.

Many people have money that isn’t being used within their monthly budget, and that might be sitting around earning little to no interest every month. You might feel that this money could be put to better use by being invested in stocks and shares. But, is it really spare at all?

Money in your account might not be touched for six months, but if your car broke suddenly, could you afford to buy a new one or payout for repairs? If there’s any chance that you might need the money, it isn’t free for long-term investment.

Investment Bonds require a long-term commitment. To take full advantage, you should be prepared to lock money away for several years. When deciding how much to invest, take time to decide how much money you could afford to set aside and lose access to. Whilst you can withdraw from Investment Bonds early, there will likely be higher charges and fees as well as a chance of other losses.

Could You Lose Your Money Forever?

Only invest money in stocks and shares if you can afford to lose it. Investors hope that their money will grow and their investments will be successful, but there’s always a chance that you’ll invest in companies that end up going bust. Diversifying your portfolio can help to protect you from the biggest financial losses, but even still, you should only invest any money that you can stand to lose.

Mis-Sold Investment Bonds and Your Financial Circumstances

If your money isn’t genuinely spare, and the risk of losing the money forever is too great, then you shouldn’t invest.

When you buy the investment product, the sales advisor has a responsibility to ensure that it’s suitable for you. This should include looking at your circumstances and, in conversation with you, determining whether the risk is right or whether you would leave yourself in trouble if the investment failed.

If that wasn’t the case and deposit your money into a bond and then leave yourself in financial difficulty, you might be able to make a claim for compensation due to the bad advice you received.

However, that’s only if you did get bad advice. You can’t claim just because you lost money – risk is inherent to investments, and if you understood that risk, then that’s still on you.

Look back over the contracts you signed and any written communication. If you feel that the risk wasn’t laid out or that your circumstances weren’t considered properly, then write to your provider to complain. If their response is unsatisfactory, you can escalate your case to the Financial Ombudsman Service.

Diversifying Investments

Assuming you had £30,000 spare, how should you choose to invest it? Some people will choose to deposit all this money in one investment fund with one provider. Another option is to diversify investments, splitting the money into multiple funds or products from multiple providers.

When you decide how much to deposit in Investment Bonds, take time to consider whether you want to buy all your stocks in the same way. Often, splitting your money and making separate investments will offer the most protection. Of course, reducing your risk can also mean that financial growth will be limited. If one investment fund did particularly well, you might end up wishing you’d put all your money in the same place.

Have You Used Other Savings and Investment Options?

In most cases, it’s unwise to make Investment Bonds your very first port of call. Other financial products will likely serve you better. Whilst Investment Bonds provide some tax benefits, an Individual Savings Account (ISA) is a fully tax-free wrapper for up to £20,000 per year. Pensions can also be more beneficial than Investment Bonds.

If you’re thinking about how much to deposit in Investment Bonds, remember to check if you’ve already used your other allowances up. If you have any ISA annual allowance outstanding, you’ll likely want to put money in your ISA before investing in any bonds.

What FSCS Protection Is Available?

You might find that you need to claim compensation from the Financial Services Compensation Fund if your provider goes bust. You might be offered full compensation for all the money you’ve lost, but your claim may be limited to a maximum of £85,000.

If you have more than £85,000 to invest, you might want to reduce your risk by investing in products from different providers. That way, if one goes bust, you should be able to get your money back.

Bear in mind that pushing the £85,000 FSCS compensation limit is risky. The payout will cover your initial investment and any gains you’ve made or interest paid, so if you invest the full £85k, then there’s a chance that you might lose any money that you’ve earned through investment success.

Money Savings Advice Tip

If you feel your investment bond was mis-sold then you could be entitled to thousands in compensation. Our top tip is to get expert compensation advice from a compensation specialist and Money Savings Advice can help you.

Help Deciding How Much to Invest

Investment Bonds are usually only something to consider if you’ve already used your full annual ISA allowance. This means that to be an Investment Bond candidate; you’re likely to have at least £25,000 to set aside every year. If you’re in this position, taking risks with your money could result in a significant loss.

If you’re not sure about how much to invest in Investment Bonds, or if you’re wondering if there’s a better way to make full use of your spare cash, then you should sit down with a financial advisor and make a comprehensive plan.

A financial advisor can help you evaluate your current financial situation and work with you to decide what to do with your money to maximise returns. A good financial advisor will take the time to think about your financial goals, so you can enjoy financial gains and use your money where it’s most needed. Whether you want money for your own retirement or to pass it on to your children or grandchildren, only invest money into Investment Bonds when you’re sure that you’re making the best choice.

How Can Money Savings Advice Help You Check If You Are Due Compensation?

Here at Money Savings Advice, we have partnered with some of the UK’s leading Financial Claims management companies. They have already helped thousands of people claim compensation for a mis-sold investment bonds and they can do the same for you.

Choosing an independent claims management company means they won’t proceed with a claim unless they are sure it is in your best interests. They are also regulated by the FCA, which gives you an additional layer of protection.

If you would like to speak to one of these claim management companies who can help you make a compensation claim, then click on the below and answer the very simple questions.


Money Savings Advice Author Ian Lewis

Ian Lewis

Ian Lewis is one of our specialist financial writers. Ian has over 15 years of financial writing experience, having worked for some of the largest financial publications in the UK covering topics from mortgages, equity release, loans and financial claims, to name a few.

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