A structured product is a type of fixed-term investment that offers a pre-determined potential return. When low interest rates mean your savings are earning next to nothing in a traditional savings account, it’s natural to look for other ways to get a better return on your money.
How do they work?
Structured products are a type of fixed-term investment that offer a pre-determined potential return, often with an element of capital protection. This return is dependent on the performance of something else, such as a single security, a basket of securities, options, indices, commodities, debt issuance or foreign currencies, and to a lesser extent, derivatives.
You agree to tie up your money for a specific time period, typically three to six years, and the rate of interest is linked to the performance of whatever it is pegged to. For example, if it was pegged to the FTSE 100 index, and the index had risen at the end of that period, you’d receive the return that was agreed at the outset. But if the index had fallen on that date, you wouldn’t get the return.