Safe havens are fast disappearing for savers

You will gain something from reading this column. I guarantee it.

Convinced? Why should you be? I’m not even sure I am. To have any confidence in a return on your investment – be it of time or money – you will want to see evidence of a believable premise, a reliable promise, and a record of past success. That’s arguably more than can be said of any retail investment product currently on offer… and certain of these columns.

No account or asset class appears capable of delivering protection against inflation, or dismal market sentiment.

For savers, this week saw the disappearance of the only product offering any semblance of a guaranteed profit: National Savings index-linked certificates, which paid annual tax-free interest equal to the annual rise in the retail price index (RPI) plus 0.5 percentage points, backed by HM Government. It was the goose that laid the golden egg – the only savings option that wasn’t too good to be true. Other inflation-linked accounts from banks and building societies come with long lock-ins – National Savings allowed penalty free withdrawals from its five-year certificates after just one year – or 40-50 per cent tax deducted if you’re a high earner. Depositing large sums in conventional accounts no longer guarantees a premium – in fact, last month, Bank of New York Mellon started charging savers for holding more than $50m. .

How many ‘safe havens’ for savers does that leave? Gold carried more downside risk at it passed $1,900 an ounce for a second time this week. Swiss francs have had their soaring exchange rate capped by an irked central bank. Norwegian krone trade at a premium, and only via risky contracts for difference (CFDs) if you are a private investor.

It is enough to make investors of us all. But that means relying on companies: their solvency, their management, and their auditors. Where that company is a bank acting as counterparty to a high-income structured product, the risk is plain to see – although savers flocking to Yorkshire Building Society’s inflation-linked account may not immediately spot that they are relying on Credit Suisse for their return. Even so, the Financial Services Authority (FSA) now intends to make sure that we don’t consider any of these structured products “guaranteed”, “protected” or “secure”. Not surprisingly, the UK Structured Products Association felt a little aggrieved this week, saying: “We are concerned that the FSA may be overstating the risks associated with structured products and understating the risks associated with other investment types.” It has a point – of 81,301 complaints to the Financial Ombudsman Service in the first quarter of 2011, just 34 complaints were about structured products that put capital at risk.

Other investments linked to companies are no more guaranteed.

High-yielding shares look superficially attractive with prices at lower levels. A number of cash-flow-rich UK companies – including as BT, Centrica and Diageo – now offer higher income payout on their shares than they do on their bonds. However, equity strategists at Citigroup point out that dividend swaps – derivative contracts whose prices reflect the outlook for dividends – are forecasting that pay-outs from European dividends will be 30 per cent lower in 2013 than they are now.

Lower-yielding investment-grade corporate bonds have already risen so far in price that they present a risk of future capital loss and a minimal income in the meantime. In August, the average yield on the benchmark Barclays Capital index of US investment grade bonds fell to all-time low of 3.42 per cent.

Seeking a higher bond yield means turning to smaller domestic companies. Next week, for example, UK foreign exchange broker Caxton is to launch a so-called ‘mini bond’ for private investors paying a coupon of 7.25 per cent in cash. It has a term of just four years and, as with a conventional corporate bond, it will repay capital in full on maturity. Caxton is not the first company to see this as a solution to corporates’ need for short-term finance and savers’ need for higher returns. John Lewis launched a bond in March paying 6 per cent in cash and gift vouchers. Hotel Chocolat, the high-street confectioner, issued a bond last year paying a return equivalent to 6.72 per cent or 7.29 per cent in it own products – the goose that laid the chocolate egg, if you like. Again, though, it is corporate risk. As one adviser said this week, you might trust the brand, but what about the balance sheet?

What, then, can offer a gain from a £100 investment and this 700-word column? How about a bond that has its capital value and income payments linked to inflation? National Grid will be offering one later this month. It’s the nearest thing to a guarantee I can find, provided the last person to leave the City doesn’t turn the light off.

matthew.vincent@ft.com