Abbey National has introduced safety plus growth issue 5, a guaranteed equity bond that is available within an individual savings account (Isa) wrapper as well as outside.
Both guises are of the bond are linked to the FTSE 100 index over a five-year term and guarantees the return of the original capital plus a minimum of 20 per cent growth. The maximum potential growth is 60 per cent at the end of the term.
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 6 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.
Bristol & West's guaranteed equity bond Isa is a similar product with a five-year term, but it also tracks the Eurostoxx 50 and Nikkei 225 in addition to the FTSE 100. The maximum growth potential is 70 per cent, which is higher than the Abbey National product. Also, the final return is based on the average level of each index during the last 12 months, so unlike the Abbey National product, index movements during the first four years do not count. This may be a disadvantage if these are prosperous years but a blessing if they are not so good.
While the Bristol & West product has the diversity that Abbey National lacks, the use of three indices could result in slightly lower returns if the other two indices do not perform as well as the FTSE 100 during the final year of the term. Equally, returns could be boosted by the other indices, but only up to 70 per cent.