The all-in-1 investment bond features cautious, balanced and growth fund links, which havce different risk profiles and different asset mixes.
The cautious fund aims for modest growth with less chance of losing money than the other fund links. It has 80 per cent in fixed interest and 10 per cent each in commercial properties and equities. The balanced fund has a higher risk profile than the cautious fund, and has a more balanced split between the asset classes. The growth fund is the most aggressive funds and has the hgihest equitry contant out of all the funds.
The asset mix of each fund can change in line with market conditions as long as the fund manager stays within the appropriate risk parameters. The funds will also shares in the profits of Liverpool Victorias businesses.
An optional five-year guarantee can be bought at the start of the term or at any of the anniversaries. This ensures the value of the bond will be no less than the original investment. The guarantee applies whether or not the investor cashes in the bond at the end of the five years, which makes it different to other products in the market where the guarantee applpies only on encashment. The guarantee can be extended at any time after the first annoversary so investors can effectively lock in profits by cancelling the exiting guarantee and buying a new one. However the cost of the guarantee will vary from year to year because it depends on market conditions at the time, so it could be higher or lower than the figures Liverpool Victoiria is currently quoting.
Investors can make penalty-free withdrawals up to 5 per cent a year whenever they like. However, if the amount withdrawn is higher than the growth on the bond, it will eat into the cpaital and constrain future growth.
Demand for with-profits has declined over recent eyars, but some advisers may feel that endowments were the problem and that the with-profits concept is not in itself a bad one. This product provides a modern with-profits product with more transparency than traditional products. But some clients may be put off by any reference to with-profts and may prefer a cautious managed fund.