Nuffield Health unveils 6 per cent mini bond

Funds and Investment Trusts May 15, 2013 by Ruth Emery

Nuffield Health has launched a five-year bond paying 6 per cent, just weeks after The Jockey Club unveiled a similar bond for income-hungry investors.

Nuffield Health, a charity that manages hospitals and gyms, is aiming to raise £15 million to support investment in healthcare services in the UK. The minimum investment in the bond is £1,000, while the maximum is £250,000.

The bond is not being issued on a market and is not tradable. It is suitable for self-invested personal pensions, but not Isas. The 6 per cent interest will have basic-rate tax deducted, so bondholders will receive 4.8 per cent each year. Any bondholders who are not normally subject to income tax may be able to reclaim the tax from HM Revenue & Customs.

The Nuffield Health bond follows a similar issue by The Jockey Club last month.

Like the Nuffield bond, The Jockey Club bond has a five-year term and is not tradable on a market.

It pays 4.75 per cent gross interest in cash (3.8 per cent net) and an additional optional 3 per cent gross interest, payable in racing rewards such as tickets, food and drink at its 15 racecourses. The minimum investment in the bond is £2,000 and the maximum is £100,000.

Neither bond is protected from loss by the Financial Services Compensation Scheme. If Nuffield Health or The Jockey Club go into administration during the term of the bond investors could lose part or all of their money.

Capita, the firm that is managing both issues, calls the bonds ‘mini bonds’ to distinguish them from retail bonds that are traded on the London Stock Exchange.

It expects the market for mini bonds to grow from less than £90 million last year to £1 billion by the end of 2013. Capita already has a pipeline of hundreds of millions of pounds from big consumer brands expected to enter this market.

Companies that have previously launched mini bonds include John Lewis and King of Shaves. Vouchers, loyalty points and free products are often offered as added incentives to customers when they sign up to a bond.  

Justin Cooper, chief executive of Capita Registrars, comments: ‘Mini bonds are going mainstream. Brands are able to raise capital at a time when lending from banks continues to prove challenging and connect with their client base or “following” and involve them in the development of their business.

‘With consumers seeing better return on investment potential than they would through a bank account, as well as extra benefits, we are expecting to see large growth in the market in the coming years. By 2017, we expect the market to reach £8 billion.’

The Jockey Club bond closes to applications on 28 May while Nuffield Health's bond is due to close on 18 June.

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