These investments have a lot of positive benefits for investors, be they resident or not. They are split into two broad categories: financial and impact (AKA green). Below is how we describe the key benefits for potential investors, with onward links to deeper content if you would like more detail.
These investments were designed to create an investment product with real benefits to savers and investors wanting to generate a low risk, stable income. This is a very common financial need - surveys suggests that millions of people use products like fixed rate savings, gilts and annuities to get these benefits.
It is certainly not a ‘get rich quick’ scheme, or a high risk investment that offers very high potential returns. But accordingly the risk of losing your money is extremely low. This is typically how saving and investment products work - a high potential gain comes with a high risk of potential loss and vice versa.
So these investments will likely appeal to sensible, organised people who want to secure a good rate with a low risk. You can read more about the target market here.
Typically, interest rates on savings and investment products vary in line with the Bank of England base rate. The same is true with these investments, because costs of borrowing for councils is also closely related to changes in the markets (see below for more on this).
However these investments offer a fixed return. Which means the interest rate is fixed, usually for 5 years. So it will not change over the investment term, even if the Bank of England base rate drops during the 5 years.
This is a good benefit for people who want certainty over what they will get on their investments. And it can be good if interest rates are falling, because it means you can lock in a rate for 5 years which might become increasingly favourable over time.
The way the rate on these investments is set is to ensure that councils don’t pay more for their borrowing than they would have done if they have borrowed from the Public Works Loan Board, including all fees paid to Abundance for managing the investment.
However the way this has worked out so far is that the actual rate we offer investors for an investment is typically in and around the best rates available on comparable products - such as fixed rate ISAs, or NS&I bonds - at the time of it being issued. So investors will get a good return on their money, and don’t have to feel like they are ‘missing out’ on financial returns in order to make this investment. This is an important part of the ‘win win’ in this investment - see key messaging for more details on this.
A key feature of our investments is the fact that they pay regular fixed interest payments.
That means they can help savers and investors with a variety of needs. Those regular capital repayments give investors options. They can reinvest them to continue to grow their pot for the future. Or they can choose to withdraw their returns to use today - there are no charges for reinvesting or withdrawing on Abundance.
You can learn more about this here.
A lower-risk investment can be an important part of a diversified portfolio, and products similar to this - which offer a steady low risk income - are often recommended to help people balance more risky elements of their investment portfolios. Investors can a council investment alongside options like cash savings, fixed-rate ISAs and government bonds. Millions of people hold products similar to these investments for this exact purpose.