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A plan of attraction from Incapital

Incapital Europe – Digital Growth Plan – FTSE 100 Index Series II

Type: Capital-protected bond

Aim: Growth linked to the performance of the FTSE 100 index

Minimum-maximum investment: £10,000- no maximum

Term: Six years

Return: 68% growth at the end of the term provided index is at or above its initial value

Protection: Original capital returned in full at the end of the term provided the index does not fall by more than 50% by the final day of the term

Closing date: October 25, 2010

Commission: Initial 2.75%

Tel: 020 7605 4000

Incapital Europe, formerly Blue Sky Asset Management, has introduced a second issue of its six-year FTSE 100-linked digital growth plan.

Discussing the positive features of the plan, Baronworth Investments director Colin Jackson says: “The literature is more informative that one normally sees with a structured product.  Perhaps this will go some way to encourage IFAs who are anti-structured products to revisit this type of product.  Having said this, the literature is user friendly, well written and easy to understand.”

Jackson feels that a potential return of 68 per cent after six years, subject to the performance of the FTSE 100 Index, is extremely attractive. He also thinks the capital protection offered is attractive, using a barrier known as European. “This means that the 50 per cent barrier is only observed at maturity so any falls in the Index during the product term will not have an impact on return of capital unless the Index is below the 50 per cent final day barrier level in which case there will be loss of capital.”

Jackson notes that the counterparty, Santander UK, is rated AA by S & P which he thinks is extremely reassuring in the current financial climate. “Returns are subject to capital gains tax, as opposed to income tax. As most people in the UK do not use their CGT exemption, it means that all or part of the returns will be paid tax free leaving the investor to use his/her Isa allowance for something else.” Jackson regards the adviser remuneration of initial 2.75 per cent, unless special terms are agreed, as below the market level.

He points out that the product is open to direct investment, Isa transfers and Sipp/SSAS investments but investors may not want to use their Isa allowances for the reason stated above.

There is nothing Jackson dislikes about this product. He says other growth plans are available on the market, but this plan seems to offer the best potential returns with an advantageous tax treatment.

Summing up, Jackson says: “For some time Blue Sky were in the structured products market and built up an enviable reputation.  It is now Incapital which means that its first class reputation can now be coupled with massive resources.  This can only be reassuring, not only to individual investors, but the market generally.”


Suitability to market: Good

Investment strategy: Good

Adviser remuneration: Average

Overall 9/10


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