Legal & General has established protected portfolio plus, a capital protected Isa that is linked to 30 UK stocks for five years.
This Isa follows on from the four previous products in the protected portfolio series, but is different in that it offers higher potential growth. Investors will get 120 per cent of the average growth in the basket of stocks, whereas previous protected portfolio products have offered 100 per cent of this growth. Like the previous products, protected portfolio plus guarantees investors the return of their original capital whatever happens to the basket of stocks.
The stocks themselves are taken from a universe of the top 200 companies in the UK. They include Alliance & Leicester, BSkyB, Hilton, Safeway and Royal Bank of Scotland.
To calculate the final returns, the closing level of each stock is recorded at the start of the term and an average is taken over the last 12 months of the term, to measure any growth. An average is then produced across all 30 stocks and investors get 120 per cent of this.
Protected portfolio plus is likely to appeal to low-risk investors who are interested in higher returns than are possible with building society accounts, but without the risk to capital that direct investment in a basket of shares would entail. However, the capital protection will only apply if investors hold the Isa for the full five-year term, so it may not suit investors looking for a short-term investment.
But on the positive side, each stock is treated separately when calculating the final returns, so the poor performance of one or two stocks will not impact on the good performance of the other stocks.