The £4bn high-risk bond bet

sAVeRs being punished by low interest rates have put almost £4 billion into risky retail investment bonds in just four years.

In a bid to avoid paltry High street savings rates, people are ploughing their cash into more risky alternatives.

Last week, buy-to-let lender Paragon closed its eight-year retail bond offer four days early after raking in £125 million from savers tempted by annual returns of more than 6 pc.

In 2013, close to £1 billion was invested in these types of bonds, including the Jockey Club paying 7.75 pc.

Other popular issues since 2010 include Tesco Bank, National Grid and severn Trent Water.

However, though these bonds offer a steady interest rate, they are not the same as fixed-rate savings bonds.

The bonds are simply IOUs — corporate bonds for private investors — which means your cash is being lent directly to large businesses.

If markets run smoothly, at the end of the term you’ll get your money back in full — and you keep all the interest earned.

But if the company goes bust, you run the risk of losing everything.

They are not protected by the Financial services Compensation scheme, which ring-fences up to £85,000 of your savings in a bank or building society (£170,000 in a joint account).