Holiday Property Bonds – bonds paying yield in discounted holidays

HPB Assurance Limited offers a Holiday Property Bond in which investors invest at least £5,000 in a bond holding holiday properties and securities. The bond pays no yield; instead, investors have the right to stay in HPB’s properties for a “no profit user charge”, which would presumably be less than they would pay to a conventional holiday provider for an equivalent holiday.

While at times its literature urges prospective investors to “only consider it for its holiday benefits”, the bond is structured as a life assurance bond (aka an insurance bond) which invests in shares and holiday properties, and terms like “investors” and “bondholders” are used liberally in its literature.

If it looks like an investment, and quacks like an investment, and I have to put money in upfront in the hope of a return (cheaper holidays than I’d get elsewhere + an eventual surrender payment) like an investment, it’s an investment.

HPB Management Ltd has been in existence since 1981 and is fully regulated by the FCA. This puts it outside the scope of what I usually review on this blog, but the unusual nature of the investment, the fact that it’s advertised directly to the general public via the colour supplements and suchlike, and the fact that these bonds are largely ignored by the mainstream investment industry, was enough to pique my interest.

Who are HPB Management?

No details of who is behind the business are provided on the HPB website.

HPB Management Ltd is 100% owned by Quality Holidays Assured Limited, which is incorporated in the Isle of Man. UK Companies House filings reveal that Robert Boyce, James Boyce and Geoffrey Baber have significant control of the company.

How does the bond work?

Investors must make an initial investment of at least £5,000 in the bond (although they can take out a loan with a minimum £2,000 deposit in order to invest – see “Geared investment” below).

The larger the investment, the more “Holiday Points” an investor receives each year, which allows them to take more HPB holidays or stay in larger properties. To stay in one of HPB’s properties, the investor pays Holiday Points plus a “no profit user charge” which covers running and maintenance costs.

Investors are locked into the bond from 14 days after their first HPB holiday until two years after investment. After that the bond can be surrendered at any time. The amount that investors will receive back will be reduced by HPB’s charges (see “Charges” below) and will also depend on the fluctuating value of the properties and securities held by the bond. HPB can delay withdrawals for up to a year if necessary to avoid selling a holiday property at a disadvantageous price.

The yield of the bond is effectively the difference between what the investor pays to go on an HPB holiday and what they would pay to go on a conventional holiday. The capital value of the investment will fluctuate depending on the value of the properties and securities held by the bond.

If investors are unable to use their Holiday Points in a given year, they can elect to receive cash instead if they give notice to HPB before the start of the year. As of January 2018 the cash alternative is 1.25% of premiums paid.


Assessing the past performance of the bond in the way that we would a conventional investment is virtually impossible.

The yield of the investment is impossible to quantify because it depends on what holidays the investor wants to take and what they would pay to take those holidays from a conventional provider vs. HPB’s “no profit user charge”.

The capital performance can however be assessed by viewing the performance of the Holiday Property Bond Series 1 fund via (ISIN GB0004674346). Since 5 June 1988 (the furthest goes back) the capital value of the bonds has fallen 38%; if the units were originally issued for £1 each, the value of the bonds’ assets have fallen by 46% since inception in 1983.

HPB’s literature says that 60% of the fund is invested in holiday properties and the remaining 40% in a portfolio of securities. I was unable to find a more detailed breakdown of what the fund invests in.

The temptation for an investor is to

  • ignore the bond’s surrender value on the grounds they are having nice holidays
  • ignore the full price they are paying for their holidays on the grounds that eventually they (or their family) will get back the money they put into the bond.

This is a recipe for disappointment when they eventually cash in their bond. In reality:

  • You cannot know whether the bond is performing as an investment without knowing how much more you would have paid to go on conventional holidays and adding this saving onto the surrender value.
  • You cannot know whether HPB holidays are good value without adding the difference between what you can get out of the bond and what you would have had from a conventional investment to your “no profit user charges” (and quarterly fees).

Geared investment

As mentioned above, investors can apply for an interest-free loan of between £3,000 and £9,000 in order to invest in the bond (with a minimum deposit of £2,000).

Borrowing to invest is a high-risk activity which is typically only suitable for highly risk-seeking investors.

The worst case scenario is that the value of the HPB bond collapses, but the investor still owes money to whoever the lender is. (Who the lender is is not specified on, but HPB Management does not appear to have FCA authorisation to issue loans itself, which suggests the loans may be arranged with a third party.)

This means their losses can exceed the amount invested; e.g. if they borrow £3,000 to buy a £5,000 Holiday Property Bond and the shares fall by half, they have an investment worth £2,500 but have to pay back a £3,000 loan, leaving them with minus £500.


The charges are described in advertisements as 25% upfront and 2.5% per annum.

Compared to conventional life assurance bonds these charges verge on the outrageous (no initial charge and all-in annual costs of 0.5% – 1.25% are currently typical for a non-advised portfolio of funds). But these charges may turn out to be more reasonable if the investor can recover some of this 25% and 2.5% by paying less for an HPB holiday compared to a similar conventional holiday, along with getting a decent return from the capital value of the bond. Whether this is likely is, as is the rule with Holiday Property Bonds, difficult to determine.

HPB also has the right to apply an exit charge (a bid-offer spread) of up to 6%. As of January 2018 it is not applying a bid-offer spread and says it has no plans to do so.

The more I think about the 25% upfront charge, the less I like it. My initial reaction was that it’s a rip-off, compared with conventional investments. My second reaction was that it may be unfair to compare it with conventional investments, as conventional investments don’t pay you in cheaper holidays.

My third reaction is that I still don’t like it. There is no way that HPB incurs upfront administrative costs of 25%. A holiday taken by an investor with a brand-new bond costs HPB the same as a holiday taken by an investor of 20 years.  In theory the holiday should be paid for by the yield HPB makes from their investment, plus the “no profit user charge”.

Effectively new investors are subsidising old ones, with an investor who has taken enough holidays to recover the initial charge paying less for their annual holidays than a new investor. This cross-subsidy may have been acceptable in the 80s when heavily front-loaded charging structures were common, but is much less so in the post-2012 era.

Should I invest in a Holiday Property Bond?

As an investment, HPB is almost impossible to assess. As a holiday provider, HPB can only be recommended if you are so keen on staying in HPB’s properties, rather than those of its rivals, that you are prepared to shrug off any losses on the initial investment. A commonly seen argument by fans or representatives of Holiday Property Bonds is that the bond should not be viewed as an investment at all. My suggestion would be that if you don’t want to view it as an investment, then don’t invest.

The Holiday Property Bond clearly works best if you can hold on to it for a very long period – possibly for your lifetime – which renders the surrender value largely irrelevant, and also maximises your chance of recovering the eye-watering 25% initial charge. However, on the holiday side I question whether it is desirable to pay a large sum of money upfront and commit yourself to holidaying with a single provider for potentially your whole lifetime. In the AirBNB era I find this unattractive.

HPB describes their investment as “unique”, quite accurately. The fact that the product has been around for over 30 years and is still unique is a major question mark. When someone has a new investment idea that is profitable for all parties, it spreads across the markets like wildfire. For example, in 1975 John Bogle had an idea to launch a fund that did not exercise any judgment in what shares to invest in, while passing on the money saved on fund research and management to the investor via lower charges. 40 years on, you can’t move for index-tracking funds.

There is no copyright or patent on HPB’s product. If Holiday Property Bonds are a good investment and a good way to pay for a holiday, why are they still unique?

What are the alternatives?

Any diversified investment portfolio can be considered an alternative to Holiday Property Bonds, as investors can put the yield from their portfolio towards the cost of their annual holidays. No investments are guaranteed to make money, but a portfolio diversified across global mainstream stockmarkets is less likely to lose money in the long term in the way the Holiday Property Bonds Series 1 fund has since 2008, despite both world stockmarkets and commercial property indices having risen significantly in that time.

Like Holiday Property Bonds, conventional investments also pay a form of Holiday Points which can be exchanged for the right to stay in holiday properties around the world, but with a far greater choice of holidays; it’s called cash.

10 thoughts on “Holiday Property Bonds – bonds paying yield in discounted holidays

  1. So after saying: “If you’re expecting original and entertaining prose every week then a blog for reviewing unregulated fixed interest securities is the wrong place for you” and then produce a blog post that also includes “frank personal opinion” with “original and entertaining prose”.

    I liked it.

    Seriously though, “new investors subsidising old …” sounds similar to the premise of a ponzi scheme and the whole thing sounds like “Timesharing” that was popular in the 70’s & 80’s – I don’t know if they are still popular but many people got bitten by those schemes. Is this Timesharing by a different name?

  2. You are far too kind 🙂

    New investors subsidising old ones via the charging structure doesn’t make it a Ponzi scheme, as long as the scheme has external revenue and it’s being shared out correctly.

    As I mentioned in passing, heavily front-loaded charging structures were very common in the 80s when HPB was launched. The “capital and accumulation” structure of many 80s personal pensions is an example; in a typical plan your first two years’ premiums would be subject to extremely high charges and subsequent premiums would have very low ones. In extreme cases, people paid in a few thousand quid for a few years and then stopped, and then spent the next 30 years watching every penny disappear in charges. It’s not Ponzi, it’s T&C.

    Front-loaded charging structures aren’t illegal, just very passé.

  3. I found your review of interest. Some things you don’t mention.
    There have been three iterations of the bond. When launched you paid one fee for life and no charges were made for using properties.. That was stopped pretty quickly and named silver while a gold bond (now HPB series 1) followed where you had to pay a user charge for each week depending on size of the property.
    40% of the initial investment was placed in securities with the aim of generating income to cover annual management charges. They took their eye off the ball and in the financial crash found they had to sell off some investments and so entered a downward spiral where increasing amounts of investments were almost totally sold off – so this fund diminished and a new platinum one ( now called HPB Series 2) was marketed where an annual fee was introduced. Silver and Gold bond holders were given the chance to switch but were not told fully what had happened until the chance to switch to platinum had closed and they had been told their bond value would fall to zero.
    After much adverse reaction ( they announced the bond valuation would not in future reflect management charges and these would only be applied when the bonds were sold. So your assessment of series 1 bond values is overly optimistic. I’m not sure how the FT allows these spurious series 1 values to be quoted!!
    Investors in property in 1990 might have expected to see significant rises in value by 2018. In fact the two bond values have changed downwards over that time.
    There are no independently audited annual accounts for the HPB which makes me wonder how the FT can give them apparent credibility by listing prices.
    The HPB owners have over the years used the bond holders to start up new businesses which generated further wealth for them through a Travel Club which offered discounts on travel and they sold off shares to members, who soon found almost all their investment was taken out as a one off dividend by the directors almost immediately. They developed a list of tenancies which were not owned by the bond but were open to bond holders to stay for a fee, and then stately home properties joined this for a short time before being split off as another company.
    The main con is that you struggle to find places on some small sites as people book them up two years ahead. Another is that most sites are in remote locations. A pro is that you can go for points free holidays if you pay the user charge within a month or so of the planned date. Another is the properties are usually of a high standard, though some sites are shared with others.
    Here are some more discussions of the pros and cons.

  4. Thanks for your post Howard. It is very interesting to read the perspective of a long-term investor, and about how the HPB offering has changed over the years.

    I do find it astonishing that a company can run a UK-regulated fund in this day and age without publishing any details of what the fund is actually invested in (beyond the extremely vague 60% in holiday properties and 40% in securities).

    It would be interesting to know how many people who inherit HPBs retain them vs. how many sell them. Given that a large number of HPB’s fans place heavy stress on the fact that it can be inherited (which allows them to ignore the investment performance), that would be a good indicator of how attractive it is, once the emotional factor is taken out of the equation.

  5. Yes I agree there is a lot of smoke and mirrors behind the way the various components work with money invested in a life assurance product HPB Assurance, based in the Isle of Man which seems designed to pay out very little on a death, and a management company HPB Management based in Jersey

    Is it reall a property bond – the blurb says
    Although you do not own the properties, the fund in which your money, after charges, is invested had net fund assets (properties and securities) of over £280 million as at 31st December 2017. The fund has no borrowings, and never has had. It also has an independent trustee, HSBC Trustee (C.I.) Limited to whom your investment will be payable.

    More information is here

    The directors of both companies are similar.
    Charges of 2.5% of £280m per annum seem excessive whilst the bondholders must have lost a further £70m to these companies over the years.

    Anyway to your question. I think most bondholders are happy to stay with it and write the money off, claiming it is not a financial investment but a lifelong holiday one and better than a Time share and hope to pass the bond on to family when they die. The HPB don’t seem to publish any information on leavers so it’s hard to know exactly. The numbers of bond holders do seem to have grown over the years. Given the amount of money paid out for marketing, that’s not so surprising.

  6. My MIL and late FIL are/were investors and we have enjoyed many holidays at the various HPB properties.

    When my MIL is gone my wife inherits half the Bond. Our intention is to continue to use the bond, however having worked in financial services my whole life we have absolutely no intention of any further investment given the “opaque” way the finances are dealt with. We hope to enjoy “points free” holidays outside main school holidays as a result but acknowledge that we may be unable to book ahead on a points basis.

  7. My wife and I have had a modest investment in HPB since 1987 so we are a pr. of early investors. At one point in the 90’s our points were doubled for free so, in our case, we feel the “investment side” of the arguement is probably satisfied. We have had a series of excellent holidays with HPB – excellent accom. / facilities / locations – and will continue to do so thru’ our retirement. The ability to double up points is really useful to allow freedom for other holidays in other locations so we do not feel locked in. We have never seen the investment as crucial to our long term security and thus it will almost certainly be passed to one of our children. I think we would recommend to all interested to take a similar approach.

  8. We stayed a couple of years ago in the Algarve, which unusually is a shared site (the Bond owns only some of the properties). We paid a user charge somewhere around £300 while a major online booking site was advertising the same size privately owned properties at the site for around £900+ for the same week. At the time, I calculated that if you had invested just enough to get the points needed to book that same property each year, it would take around 5 years before you covered the initial up front charge on the investment. After that the Bond, at least at that site, would year on year be cheaper than renting an identical apartment at full cost. The Bond also has its own private pools and Club House at the site and its apartments are constantly of a high quality, which was certainly not always the case for the other apartments on the site if some of the online reviews were to be believed.

  9. My wife and I have been bondholders from an early stage. We calculated that after ten hpb holidays we had recovered the initial 25% charge, by carefully comparing similar properties. Our families and we have used hpb sites here and abroad many times since, and saved every time. We value the consistently high standard of accommodation and site facilities. Everything is always well maintained. The “no points” system allows all-season use by different generations and jobs. Our bonds will be inherited by our two daughters and no doubt eventually our grt-grandchildren who totally enjoy hpb sites.
    We agree about the critically vague financial arrangements of the management company, but don’t feel affected by it – holiday savings continue. The tenancy programme seems an unrelated irrelevance, but we don’t feel harmed by it.
    Our experience of good quality holidays and fellow bondholders continues.

  10. I have been a bond hol?er since 1985 I have been on some VERY good holidays and VERY good sites
    I could recommend them to anyone , but if I had my time over again I would NOT INVEST ,it was not
    What we wear told , was Not a good investment for the PEOPLE who bought shares,But the PEOPLE
    who started the company are MILLIONAIRES, if we had shears in the company , like we thought we did
    So would WE BE

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