What are Capital Protected Bonds?

A Capital Protected Bond is an investment sold by the UK banks and insurance companies, and is marketed as being a structured investment. A structured product is a fixed-term investment, where the pay-out relies on the performance of something else, like a stock market index.

Capital Protected Bonds offer customers the opportunity to grow their investment, with the initial deposit being protected. The return of capital protected bonds is linked to the performance of a stock market, such as the FTSE 100. They were generally sold between 2007 and 2012 for terms of usually 5-6 years. When you buy a structured product, you are agreeing to tie up your money for the set term. This may mean that you could face high charges should you want to exit the product.

If the market was to rise, the customer would see a growth on their investment, however, if the markets were to fall, the initial deposit made would still be protected.

While the capital is protected from market falls, the Banks selling the products do charge management fees for providing the protection, meaning your initial deposit will reduce. So, even when the capital is guaranteed, you may get back less than what you put in due to fees and charges.

Capital Protected Bonds are complex products by nature, however they were sold as being low risk due to the capital protection they offered.

Often, the potential benefits were capped so while the market may grow you would only see the benefit up to a set percentage. Also, as you would not be investing directly into the stock markets, you would not benefit from dividend payments as you would if you had invested in shares directly.

It is possible that at the end of the Bonds term, your initial deposit has not made a profit, or the profit it has made is very low, meaning it is likely your money would have worked better for you in a regular savings account.

Most high street banks offered products of this nature, giving them varying names such as:

  • Guaranteed Equity Bonds
  • Structured Cash ISAs
  • Guaranteed Capital Plans
  • Protected Investment Funds

One of the UK’s major banks, Lloyds, admitted they sold these complex products when a savings account would have been more beneficial. Advisors at Lloyds were reportedly promising returns of up to 75%, and full capital protection.

How were Capital Protected Bonds mis-sold?

Capital Protected Bonds are highly complex products. If you were led to believe that a decent return was guaranteed, then you may have cause for complaint. The chances of a successful complaint are increased if;

  • You were either retired or close to retirement at the time;
  • You had very little prior experience (or none at all) of investing;
  • You were identified as a likely investor after receiving a cash windfall; or
  • You were advised to invest a large chunk of your savings in one go.

Customers have been left disappointed by the returns they have received, and many were reliant on receiving decent returns to help them in their retirement.

The Banks offered the Capital Protected Bonds to customers who may have been unable to understand them, or they may not have had the necessary experience in investments, or the Bonds were not appropriately explained to them.


The Banks appear to have over-emphasised the returns that the bond was likely to receive, without explaining the risks associated with investments relating to the markets. The bonds were described as having little to no risk.

With a lack of experience in investments, customers had no way of knowing whether the investment was sound or not. This meant that they placed their trust in the Bank and its advisors, believing they would be acting in the customers best interests.

What does this mean for me?

When your Capital Protected Bond matures (if it has yet to do so), you may have expected to find that your original capital has grown, however you may also find that you have gained little to no increase on your original capital, in opposition to what you were led to believe when you invested in the Capital Protected Bond.

If you were sold Capital Protected Bond by Lloyds, or any other Bank or business, and feel it has not performed as you were led to believe it would, then we believe it is paramount that you seek appropriate, professional advice before making a claim. As with many bank-led review schemes, the complaints procedure may appear straight forward, however in our experience it never is.

We have had significant success challenging poor offers and getting significant uplifts for our clients. We have challenged Lloyds, and other major Banks on a number of occasions for sub-par offers of redress, successfully overturning an offer that a customer was dissatisfied with under the bank-led review. We have obtained a £1,150,000 uplift for one of our clients.

However, we have found that if clients had sought specific, professional advice before making a claim themselves, important aspects for the claim could have been raised in the first instance, which in turn could have yielded a better outcome.

How can we help?

Here at Cooper Stern we are experts at advising individuals and businesses on potentially mis-sold complex financial products.

We offer a no-obligation initial review of a potential Capital Protected Bond claim, and advise on the strengths and weaknesses of making a claim. Following this, we work on a no-win no-fee basis meaning we will only take forward claims we believe have a strong chance of succeeding.

If you feel you have been mis-sold a Capital Protected Bond and want us to look into the matter for you please get in touch. You can fill in our simple online enquiry form and one of our expert advisors will call you back to discuss your mis-sold financial product in more detail. Alternatively, you can call us on 01204 328 287 and we will be more than happy to discuss your queries.

how can we help you?

Have any questions? Get in touch with the Cooper Stern team today by submitting an inquiry online.

There are no substantial up-front costs, and our clients like that. The claims we have settled so far have been on a full redress basis. The banks are misbehaving by making offers to businesses, partially repaying what they have paid, and saying they do not need legal advice and making very low offers. I would urge businesses who are affected to get in touch with us before it is too late.

Dan Fallows
Director, Cooper Stern