Mencap’s property arm offers 3.25% return with latest bond

Everyday savers looking for an ethical home for their cash will have the opportunity to invest in disability charity Mencap’s property arm through its latest charity retail bond.

Golden Lane Housing, which specialises in renting accommodation to people with learning disabilities, is issuing a retail bond with an annual return of 3.25 per cent. 

Retail bonds are another way to invest directly in companies and are bought and sold through brokers and investment platforms. 

However, they come with risks and money isn’t protected in the same way as it is with a bank or building society. There have also been some high profile retail bond collapses in recent years. 

Golden Lane Housing provides supported housing for people with learning difficulties 

They are specifically targeted at ordinary investors and are separate from the larger corporate bond market dominated by institutions.

Golden Lane Housing’s new bonds will be issued by the vehicle Retail Charity Bonds and listed on the London Stock Exchange. 

RCB was launched by Cambridge-based Allia in 2014 to allow charities to tap into the bond market.

It has issued £300million worth of bonds for a variety of charities including care home operators and recently the Alnwick Garden Trust.

Golden Lane Housing became the first charity to issue a retail bond in 2014, offering a 4.375 per cent return, before offering a £18million 3.9 per cent bond three years later.

Neither bond has been redeemed yet but Golden Lane told This Is Money that they were both on track to be so.

The new bonds will be available to wholesale and retail investors and pay a fixed interest rate of 3.25 per cent until 22 July 2031. 

That is the expected maturity date, when investors should get their money back. But the final legal maturity date is 22 July 2033. 

If the payback date is extended beyond summer 2031, Allia says the interest rate will be hiked to 4.25 per cent during that period.

Investors are allowed to sell the bonds at any time – but this relies on a buyer wanting them. 

‘As with any bond of this type firstly investors need to assess the risks – either income not being paid at the level advertised, or not receiving all your capital back,’ Sarah Coles, personal finance analyst at Hargreaves Lansdown warned.

‘The rate of interest is a decent rule of thumb guide to how “risky” this bond is and 3.25 per cent is way above what you might get from a fixed savings account. 

‘But it is also not hugely attractive when you consider how inflation and price rises will dent the value of your capital over the term,’ Coles said. 

She suggested Golden Lane’s bond will be more attractive to investors who are ‘less concerned about returns and more interested in investing according to their values’. 

Social housing has become an increasingly attractive investment opportunity for many savers, with a handful of investment trusts operating in this area, including Triple Point and Civitas. 

‘The demand for investment opportunities that will create positive impact is growing continually, and the RCB platform plays a vital role in enabling charity borrowers to access that demand and raise funding for growth,’ Allia chief executive Adrian Bell said. 

John Verge, chief executive of Golden Lane Housing, said: ‘One of the biggest challenges facing people with a learning disability in the UK is a lack of access to suitable supported accommodation. 

‘Due to the chronic housing shortage, a significant number of people with a learning disability live in unsuitable residential institutions or with elderly parents and carers, and as a result face an uncertain future.

‘We are extremely proud of the work we do to help people live in the right house, in the right place, with the right support’.

This post first appeared on Dailymail.co.uk