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Abbey goes for eighth issue

Abbey National has introduced safety plus growth 8, a guaranteed equity bond that provides minimum growth of 20 per cent and maximum growth of 55 per cent.

The bond is linked to the FTSE 100 index through a Dublin-based company called Quaich Investments 7 and there is also an Isa version of the product. Both versions guarantee the return of investors’ original capital whatever happens to the index plus the minimum growth.

To calculate the final returns, the average level of the FTSE 100 index is recorded for each six-month period during the term. The growth for each period is capped at 5 per cent, so any increase in the index above this is not passed on to investors. These six-monthly averages are then added together to produce the final return.

The Abbey National bond occupies the lower-risk end of the guaranteed equity bond market, but the problem with many products of this nature is that growth potential is capped.

The minimum growth the Abbey National bond provides could make it more attractive to some investors than products such as Bristol & West’s five-year guaranteed equity bond, which guarantees only the return of the original capital.

However, the maximum growth potential of the Abbey National bond is lower than Bristol & West’s maximum growth potential of 70 per cent. Investors would need to decide whether it is more important to receive some return above their original capital or whether the highest growth potential is a bigger priority.

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