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Barclays gets in the fix


Defined Returns Plan – Issue M7

Type: Guaranteed equity bond

Aim: Growth linked to the performance of the FTSE 100 index

Minimum-maximum investment: £10,000-£500,000

Term: Choice of three or five years

Return: 18 per cent of the original capital at the end of the three-year term or 35% of the original capital at the end of the five-year term

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

Closing date: January 31, 2007

Commission: Initial 2% for three-year term, initial 5% for five-year term

Tel: 0800 234 6021

This structured product from Barclays offers investors defined returns of 18 per cent or 35 per cent over a term of three and five years respectively.

Baronworth director Colin Jackson observes that this product offers the choice of a three- year term, a five- year term or a combination of both.

“Returns are dependent upon the performance of the FTSE 100. There will be a fixed 18 per cent return for the three- year plan and 35 per cent fixed investment return for the five- year plan if the index is the same or higher than the starting level. In any event, the product gives 100 per cent of the original capital back at maturity,” he says.

Jackson says that as the product does not offer any income and is focused only on growth, it is totally unsuitable for clients who are looking for income. However, he likes the tax efficiency of the product. “Any returns are subject to capital gains tax as opposed to income tax, so could offer an enormous advantage to tax payers, particularly those who pay higher rate tax.,” says Jackson.

If investors do not use all or part of their CGT allowance, they could end up receiving the return tax-free. This is dependent upon the level of the investment and the amount of CGT allowance available. “ It also means that they can utilise their Isa allowance for something else,” says Jackson.

Casting an eye over the product literature, Jackson finds it very well written and easy to understand. “The product provider, Barclays, is solid, which adds reassurance to the capital protection. The level of adviser remuneration at 3 per cent for the five-year plan and 2 per cent for the three- year plan is in line with the market,” says Jackson.

Discussing his dislikes, Jackson says: “There is no facility to take income and the fixed returns are on the low side. As they are fixed, irrespective of the performance of the index, it means that if we see good performance over the term then this will not be of benefit to the investor who will not receive any more than the fixed returns.”

Jackson cannot find any other products providing direct competition. “Other products where the return is linked to the index means that clients will receive a percentage of the performance of the index as opposed to a fixed return,” he says.


Suitability to market: Average

Investment strategy: Average

Adviser remuneration: Good

Overall 6/10


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