Abbey National – High income & growth
Type: Mini or maxi guaranteed Isa.
Aim: Income or growth by investing in a Dublin-based company which tracks the Dow Jones Eurostoxx 50 index.
Minimum-maximum investment: Lump sum £1,000-£7,000.
Investment choice: Cenus Investments 25.
Term: Five years.
Guarantee: Providing that between November 17, 2006 and December 14, 2006 the index does not fall below the Eurostoxx 50 index level on October 17, 2001, the full capital will be repaid (as well as the income or growth). For every 1 per cent fall there will be a corresponding 1 per cent fall in capital.
Return: 37 per cent after five years, annual 7 per cent, monthly 0.55 per cent of amount invested.
Yield: 37 per cent after five years.
Closing date: October 31, 2001.
Charges: Implicit 6.03 per cent.
Tel: 0800 302030.
Roy Rutter – Principal, Aptitude Financial Planning
Robert Graham – Associate partner, The Scottish Financial Independence Group
Keith Lewis – Proprietor, Hartley Greatbatch
Suitability to market: 7
Investment strategy: 6.5
Company's reputation: 7.7
Product literature: 7
Abbey National has introduced its high income & growth Isa, a Dublin-based company that tracks the Dow Jones Eurostoxx 50 index.
Looking at how the Isa fits into the market Graham says: “There are few products offering secure income for longer than three years. This should be welcomed.” Lewis says: “Nothing too new and exciting. It is a useful option to use the tax shelter of a Isa for these types of income and growth bonds.”
Rutter thinks the five-year term is in this product's favour, he says: “Variants of this, from banks and from the likes of GE Life and Eurolife make for a crowded market. In this product's favour is the more realistic five year term, against it is the lower headline rates.”
Identifying the type of investors the Isa is likely to attract, Rutter says: “Someone looking for income linked to an index-tracking investment.” Lewis suggests mainly those needing income that are not too concerned about future captial. “Therefore quite useful for those who invest as part of a larger portfolio,” he says.
Graham says: “The client who needs to budget precisely with at least part of his assets.”
Turning to the marketing opportunties the Isa will provide Graham says: “Good mailshot product, could be good for Pep transfers.”
Rutter and Lewis both comment on the state of the stockmarket. Lewis says: “At this moment, with falling interest rates, the product could be received quite well and does produce a marketing opportunity. With markets on the fall this is a low level of entry, with higher expectations to come in the future. Care is needed to present the pitfalls to clients.” Rutter says: “Income seekers who have not taken up this years Isa allowance because of the depressed state of stockmarkets so far.”
Discussing the useful features and strong points of the Isa, Graham says: “The income beats most alternatives. The capital, although not guaranteed, is not at great risk, especially since the starting level of the index is relatively depressed.”
Rutter points out the option of monthly income and the five-year term, he says: “It's linked to just one index, which I find client's prefer.” He goes on to point out the simplicity of the terms.
Lewis says: “The 7 per cent income or 6.6 per cent when paid monthly is quite useful, considering future prospects after interest rates. Low levels of entry of £1,000 make it more of a mass product than other similar ones which start at £7,000 or £10,000 minimum.”
Analysing the investment strategy Lewis says: “Due to timing the opportunity for clients the outlook could be bright, although investing in Europe can be preceived to be more risky than the UK, I believe the concept to be misplaced.”