Will you be safe with a Fortress Bond?

A NEW bond that promises to pay as much as 4.5 pc over five years is attracting the eye of savers.

But it’s from a company many have never heard of — and people are confused by the small print.

MONEY MAIL gets to grips with the Castle Trust fixed-rate bonds.

WHAT IS CASTLE TRUST?

SET up in 2012, it is backed by an American private equity firm. It offers mortgage and investment products.

It has a range of fixed-rate Fortress Bond deals. Rates start at 3 pc for a one-year bond, rising to five years at 4.5 pc. These are not savings accounts, but a type of investment where you lend money to a company and it agrees to pay you interest in return for the loan.

The money you loan to Castle Trust is used for mortgage loans. The repayments made by its mortgage customers are used to pay you interest. These returns are guaranteed as long as Castle Trust doesn’t go bust.

Fortress Bonds are available until April 30 and you can invest online, by telephone or by post. The minimum investment is £1,000.

IS IT RISKY?

THE risk you take lies primarily in Castle Trust’s mortgage customers. If they don’t make their repay- ments, the firm has nothing with which to pay your interest.

The other concern would be Castle Trust itself running into difficulties.

The Fortress Bond is like a corporate bond, which means you are lending your money to a company. Because of that there is always a risk that it might default on the loan.

CAN I PUT IT IN MY ISA?

YES, but only into a stocks and shares Isa. The reason it is Isa-able is because it is effectively a corporate bond, which is listed on the Dublin Stock Exchange.

This means you get an extra level of protection because it is protected by the Financial Services Compensation Scheme. Castle Trust explains that investments are covered up to £50,000 as an investment under the compensation scheme. (It would be covered up to £85,000 in a savings account).

WHAT’S THE VERDICT?

IT’S an unusual product, but that doesn’t mean it won’t suit some people.

Be warned that you can set up only one stocks and shares Isa each tax year, so if you set up one with Castle Trust you’ll have to wait until next tax year to make any other tax-free investments.