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Abbey homes in on property


Capital Guaranteed Residential Property Bond 8

Type: Capital-protected bond

Aim: Growth linked to the performance of the Halifax House Price Index

Minimum- maximum investment: £3,000-no maximum, Isa £3,000

Term: Five years

Return: 110% of the growth in the index at the end of the term

Guarantee: Original capital returned in full at the end of the term regardless of the performance of the index

Closing date: July 27, 2007, July 13, 2007 for Pep/Isa transfers

Commission: Initial 3%

Tel: 020 7756 4125

This structured product from Abbey is linked to the performance of the Halifax House Price index for a term of five years. It offers 110 per cent of the growth in the index plus a full capital return.

Looking at the ways is this product good for IFAs and their clients, Baronworth director Colin Jackson says: “This is the only product of its type that relies upon the Halifax House Price Index, so it should prove popular for those investors who want to have part of their portfolio invested in residential property without involving themselves in direct investment.”

The product literature is both attractive and well written in Jackson’s view. He also considers the adviser remuneration of 3 per cent as in line with the market.

Discussing the outlook for the residential property market Jackson says: “At the moment, there is considerable speculation as to whether residential house prices will be heading south. If they do, then the term of this product – five years – should be sufficient to see house prices rise again before maturity. In any event, there is guaranteed return of capital at the end of the term,”

Jackson observes that any further return is calculated at 110 per cent of any growth in the Halifax House Price index averaged over the final year with no upper limit, which he regards as an attractive participation rate.

Jackson also highlights the fact that the product can be held in a number of ways. “Investors have the choice of investing into a self-invested personal pension or small self-administered scheme, opening a new mini cash Isa or transferring an existing one. It can also accept transferred Toisas and direct investments,” he says.

Turning to the less attractive features of the product Jackson says: “Although this is a growth product, any return on a direct investment is taxed as income, not as a capital gain.”

He also feels the current nervousness concerning the residential property market may prove to be a turn-off to potential investors although he concedes that this is not the fault of the Abbey product. “The bond does run for five years and there is guaranteed return of capital at the end of the term,” he says.

Scanning the market for possible competitors Jackson says: “I cannot locate any other products that rely solely on the Halifax House Price index. The nearest I could find is the iaccount from Intelligent Money, but that relies upon both the Halifax House Price index and the FTSE 100 index. It runs for 10 years, as opposed to Abbey’s five years, and has a participation rate of 140 per cent compared with Abbey’s 110 per cent. This means it can hardly be described as real competition.”

Summing up Jackson says: “The lack of competition coupled with the comfort of Abbey’s name and guaranteed return of capital at the end of the term could outweigh any worries about the residential property market.”


Suitability to market: Good
Investment strategy: Good
Adviser remuneration: Good

Overall 8/10


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