Investors in the plan will receive a full capital return at the end of the term regardless of index performance. They will also receive 200 per cent of any growth in the index. To calculate the returns the monthly level of the Halifax House Price Index on November 21, 2005 is compared with an average of the monthly levels of the index over the last 12 months of the term. The product will mature on November 20, 2015 and may be a way self-invested personal pensions and small self-administered schemes can access the residential property market six months ahead of proposed changes to pension arrangements on A-Day 6 April 2006.
Although linking structured products to the Halifax House Price Index is not new, this product is unique because it is linked solely to this index for a longer term than most structured products. It enables investors to gain long-term exposure to the UK housing market without the risks of direct investment such as void rental periods, difficult tenants, unexpected maintenance costs, time spent managing the property or the larger amount of capital needed for an investment such as buy-to-let. It also offers capital protection which investing in property shares would not provide.
A product like this may also appeal to investors who have seen the housing market perform well. Recent research from Prudential found that investors are still confident in the houses market despite warnings of a slowdown. Prices, while still rising, are doing so at a slower rate and although there is no risk to capital, there is a risk that growth in the housing market may have run out of steam by the time this product matures.