INVESTMENT CLINIC

I’VE heard you can get returns as high as 9 pc by investing in retail bonds. What are these? S. K., via email RETAIL bonds are essentially an IOU from a company: you lend the firm your money and it gives you a regular payout at a fixed rate of interest. Then, at the end of the fixed period, you get your money back in full.

Firms that offer retail bonds to investors tend to be giant companies such as BT, Legal & General and Vodafone.

But so do a number of smaller ones, such as buy-to-let mortgage lender Paragon and Wasps, the Coventry-based rugby club.

The returns can be attractive. Lloyds Bank, for example, is paying 9.6 pc on a bond maturing in April 2023.

A full list of the 170 retail bonds on offer can be found on the London Stock Exchange’s order book for retail bonds ( london stockexchange.com). However, there you will find only details such as the price of the bond and the rate of interest it pays.

If you actually want to invest in one, you need to use a stock brokers. Find a full list by typing ‘retail bond broker list’ into the stock exchange’s website.

You can hold these retail bonds in a stocks and shares Isa — but it must have five years left on the term. You can sell your bonds before the maturity date, but you could get back less (or more) than you paid, depending on the demand from other investors.

Remember, your money is only as safe as the company in which you invest. Retail bonds are not covered by the Financial Services Compensation Scheme, which protects up to £85,000 in a savings account if your bank goes bust.