A new retail bond paying a 7.5% coupon has launched, beating the interest rates on top savings accounts.
The best savings account currently pays 5%, after Chase hiked its easy-access rate for new customers.
Care village operator Belong’s 7.5% bond will likely appeal to savers fed up with falling interest rates, and investors looking for regular income.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Retail bonds pay a fixed rate of interest – known as the “coupon” – for a set period. They are issued by companies and charities looking to raise extra capital by borrowing from investors.
How will the Belong retail bond work?
The Belong bond will pay investors a 7.5% rate bi-annually until its maturity in 2030. The offer period is expected to close at 12pm on 30 June.
It is the care village operator’s second bond issuance following a £50 million raise in 2018.
The retail bond can be bought through Hargreaves Lansdown, Interactive Investor or AJ Bell, or via wealth advisers and brokers. The minimum initial subscription is £500, with increments of £100 thereafter. Interest payments will be made on 7 January and 7 July each year, with the first due next January.
The new bonds are expected to be admitted to trading on the London Stock Exchange's regulated market and through the electronic Order Book for Retail Bonds (ORB) on 8 July 2025.
So, what is Belong exactly? Established in 1991, Belong is a charity that has eight care villages in northern England, with a ninth site due to open next year. It serves more than 1,000 older people, two-thirds of whom have dementia.
Belong says its bond will appeal to ethical investors as the money raised will make a positive social impact. In terms of its financials, the charity says it is operationally very robust: 65% of its customers are privately funded, it has an above-average occupancy rate of 96%, and has almost doubled revenue over the past five years to £51 million.
Sam Benstead, fixed income lead at Interactive Investor, comments: “At a 7.5% yield, it is above the 5.5% yield that the safest sterling investment grade bonds typically yield at the moment, and above the 4% yield from gilts maturing in five years.
“Investors must do their own research on the creditworthiness of the bond issuer, as a yield of 7.5% puts it in the high yield or “junk” bond category.”
If you’re interested in investing, you can find out more information on the Belong bonds site – and make sure you’re aware of the risks of retail bonds, which we outline below.
What are the risks of retail bonds?
First, let’s look at the differences between savings accounts and retail bonds. Cash held in UK savings accounts is protected by the Financial Services Compensation Scheme (FSCS), with up to £85,000 per person, per banking licence, covered in the event of a collapse.
Retail bonds, however, are not covered by the scheme. So if the issuer were to go bust, there would be no guarantee that investors would receive their money back.
Laith Khalaf, head of investment analysis at AJ Bell, tells MoneyWeek: “While the headline rates on retail bonds might be extremely attractive, there’s no such thing as a free lunch when it comes to investing, and higher levels of interest generally reflect more risk.
“Investors need to consider the return of their money, as well as the return on their money. If a company you loan money to goes bust, then you may lose some or all of your capital, as well as outstanding interest payments.”
He says it’s crucial that investors have a handle on the finances of the company (or charity) issuing the bonds before buying them, which can be found in their accounts, and most specifically the balance sheet.
Khalaf adds: “If your retail bond doesn’t repay your capital in full, then you have no recourse to the FSCS. Consumers need to treat retail bonds as an investment, which carries capital risk, rather than as a high-interest savings account, which largely doesn’t.”
Having said that, it’s worth pointing out that while retail bonds like the Belong one have risks, they are not “mini-bonds”, the advertising of which has been banned by the Financial Conduct Authority.
Belong’s retail bonds will be traded publicly on the London Stock Exchange (LSE), so investors have the reassurance that the stock exchange’s requirements have been met.
Benstead notes: “When looking at bonds with such high yields, it can be prudent to outsource bond selection to a professional, such as via an actively managed fund. A professional fund manager will have a team of credit analysts, and also spread risk across different sectors and maturities.”
What is the Order Book for Retail Bonds (ORB)?
The LSE introduced the Order Book for Retail Bonds (ORB), a dedicated platform for bonds aimed at retail investors, in February 2010.
Traditionally, bonds are traded in lots of £100,000, making it all but impossible for the average investor to buy a portfolio of their choosing. However, on the ORB, the majority of issues can be traded in lots as low as £100.
The ORB hasn’t really taken the market by storm. After an initial flurry of trading, new issues dried up, although a few firms continue to use the platform.
Companies using the ORB over the past few years include International Personal Finance (bond maturing on 12 December 2027 and paying 12% per annum), and LendInvest (paying 11.5% through to 3 October 2026).
-
Is Britain heading for a big debt crisis?Opinion Things are not yet as bad as some reports have claimed. But they sure aren’t rosy either, says Julian Jessop
-
Bitcoin 'has become the reserve asset of the internet'Opinion The cryptocurrency has established itself as the electronic version of gold, says ByteTree’s Charlie Morris
-
Why investors can no longer trust traditional statistical indicatorsOpinion The statistical indicators and data investors have relied on for decades are no longer fit for purpose. It's time to move on, says Helen Thomas
-
London Stock Exchange exodus: which companies could be next to go?As many companies exit London, the steady trickle of stocks listing elsewhere could turn into a stampede. Who will be next, and what does this mean for investors?
-
Is the London Stock Exchange in peril?More than 150 companies have left the London Stock Exchange or moved their primary listing since the start of 2024. What does it mean for investors and the economy?
-
Shein prepares for London Stock Exchange listingShein plans for a London Stock Exchange listing after facing hurdles in New York. It’s in a race against time. Matthew Partridge reports
-
Five stocks for 2025As 2025 gets underway, we explore five stocks to consider for a new year that promises opportunity alongside uncertainty
-
How will markets react to the next Bank of England rate decision?The Bank of England is due to announce its latest interest rate decision on Thursday, 2nd November, but how will markets react?
