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Arc and Investec explore income

Arc Capital & Income and Investec Structured Products have both introduced five-year FTSE 100 linked plans that provide income.

The Arc plan pays income regardless of the performance of the index but the return of capital depends on the index performance of the index.

The Investec product does the reverse in linking the income payments to the stockmarket while a full capital return is provided at the end of the term regardless of index performance.

The Arc fixed income plan 12 has two investment options for investors withdifferent levels of income and capital protection over a term of five years and three weeks.

Cautious income pays income of 0.6 per cent a month and higher income pays 0.65 per cent a month.The higher income option will provide a full capital return provided the index has not fallen by more than 30 per cent at the end of the term.

To calculate the return of capital, the index is measured at the close of business of June 5, 2009 and compared with the closing level on June 5,2014. If the index falls by more than 30 per cent, capital will be reducedby 1 per cent for every 1 per cent fall in the index. Capital protection is increased for the cautious option which allows for the index to fall by up to 50 per cent before capital is reduced.

The Investec product provides 6 per cent gross annual income, 1.47 per cent gross quarterly income or 0.48 per cent monthly income. Income is payable throughout the term provided the index does not fall by more than 50 per cent at any time during the investment term. If this barrier is breached,income payments stop and the original capital will be returned to investorsat the end of the term.

Both monthly income options of the Arc product are higher than Investec¹s monthly income option, but Investec offers more choice with quarterly and annual income options and allows investors to take a gamble with incomepayments rather than their capital.

Choosing between the products may depend on whether investors view income orthe return of their capital as a priority. However, Arc¹s cautious income option may provide the middle ground as its returns are higher than Investec¹s monthly income option but capital protection is greater than the higher income option.

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