Type: Structured deposit
Aim: Growth linked to the performance of the FTSE 100 index
Minimum-maximum investment: £5,100-£500,000, Isa £5,340
Term: Six years
Return: 5% for each year that the anniversary index level is at or above its initial value, with ability to receive returns missed in previous years where the anniversary index level has been lower than the initial value
Protection: Original capital returned in full at the end of the term regardless of the performance of the index
Closing date: May 27, 2011, May 13, 2011 for Isa transfers
Commission: Initial 3%
This structured deposit is linked to the performance of the FTSE 100 index for six years. It enables investors to lock in a return of 5 per cent growth for each year that the index is at or above its initial value.
Baronworth Investments director Colin Jackson says: “This is a six-year growth plan where returns are linked to the performance of the FTSE 100 Index. It offers capital protection and the potential to lock in 5 per cent for each year the index is at least equal to or above its initial level.
“The level of the index is observed on each anniversary date. If a payment is missed because the index was below its initial index, but subsequently locked in on a future anniversary, then the missed payments are also locked in and paid at maturity.”
Jackson points out that f the maximum return is achieved investors will earn a fixed return of 30 per cent after six years. “But taking into account compounding, the return is actually less than the 5 per cent referred to above,” he says.
The counterparty is Barclays, which is rated AA- by Standard & Poor’s. Jackson thinks the rating should give a degree of reassurance to investors. “This, coupled with the capital protection at maturity would, on the face of it, make this an attractive proposition. However, from an investor’s perspective, the returns are relatively low. “
Jackson adds that if an investment is made outside an Isa, any returns are taxed as income rather than a capital gain. “This is a definite downside for taxpayers, particularly higher-rate taxpayers. The adviser remuneration of 2.5 per cent is below the market norm,” he says.
Discussing the main disadvantages of the plan Jackson says: “The maximum return is too low, coupled with the way the plan is taxed.”
Discussing the main competition for the plan Jackson says: “There are other structured products on the market that offer capital protection at maturity with a potentially better return and more favourable tax treatment outside an Isa.”
Summing up, Jackson says: “The name Barclays is certainly reassuring to investors in these current uncertain times. However, the potential returns and the way they are taxed could well be a turn off.”
Suitability to market: Average
Investment strategy: Average
Adviser remuneration: Poor