Bond performance can be affected by many factors. Let's review some of the key factors that contribute to disappointing bond performance.

If you weren't made fully aware of any of these issues, you may have a case for bond compensation.

Poor Capital Growth
Are you left with less, not more?

Your initial bond investment may have failed to grow in line with your expectations. You might even have less money than you started with. This can happen particularly when people buy high risk bonds. In this case, you should have been made fully aware that your initial capital investment is not protected and that, whilst you have the chance to earn higher interest rates, you are also at greater risk of losing money as a result of poor capital growth.

Income Withdrawal
Watch out for charges

If you're relying on bonds to provide income, you can also end up with less money than when you started. Making income withdrawals each year can cause problems. It's a question of degree. If your annual income withdrawal is less than 5% of the value of your bonds, their performance should not be affected. If it's more, you may have to pay income tax. Other charges may be payable when you make withdrawals before your bonds mature including fees and an early redemption charge known as the Market Value Adjuster. Were you told about these?

Tax on Bonds
Where do you stand?

The taxation issues surrounding bonds can be complicated. Some bonds are exempt from tax. Some are not. Income tax is payable if you withdraw more than 5% of your bond value per year. Capital gains tax does not apply on gains you make when your money matures. Inheritance tax may be payable in some cases. Do you know where you stand?

Inheritance Tax Avoidance
Or not?

Avoiding inheritance tax - currently running at 40% - is a legitimate reason why many people choose investment bonds. But are your beneficiaries protected? If a trust has been set up incorrectly, they may still have to pay. It's worth checking your bonds are in order. If not, you or your beneficiaries may be entitled to compensation.

Bond Portfolio
Is yours balanced?

Your bond portfolio should be spread across different types of funds to spread your risk. If your focus is on one type of bond or a single company, you could be vulnerable to poor returns and a fall in interest will have a major effect on your money. It's a case of too many eggs in one basket.

High Risk Bonds
Are the stakes too high?

High risk bonds, also known as high yield bonds, carry the potential for greater gains. They also carry the potential for greater losses. For this reason, high risk bonds should be chosen with great care. The possibility of poor capital growth needs to be fully explained to an investor. Lifestyle issues should be discussed to ensure these kind of bonds are a suitable choice. Were you put clearly in the picture?

Redemption Penalties
Sting in the tail If you cash in your bonds early, you may have to pay a redemption penalty known as the Market Value Adjuster. Some companies charge as much as 25% so it's possible to be left with less money than your original investment. But life takes many twists and turns and you never know when you might need extra money in an emergency. Were the costs of cashing in your bonds early fully explained to you?

If you think any of these issues apply in your situation, you may be able to make a claim. Remember that making a claim does not affect the performance of your bonds so you have nothing to lose by making a claim for bond compensation.

Can You Claim for Missold Bonds?
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