Bristol & West has brought out issue 12 of its Balanced FTSE GEB, a guaranteed equity bond with a seven-year term.
The product is divided into two elements to provide a combination of income and growth.. Up to half of investors' capital goes into a 12-month fixed-rate savings account which pays 8 per cent gross.
The rest of the capital is placed into a guaranteed equity bond to provide growth of 90 per cent of the rise in the FTSE 100 index. There will be a full capital return at the end of the term regardless of the performance of the index.
To calculate the returns, the closing level of the index is recorded on August 16, 2004 and is compared with an average taken over the last 12 months of the term. Investors receive 90 per cent of the difference between the two figures, which is known as a participation rate.
There is a lock-in feature which may be chosen only at the outset. This means that if the index rises by 60 per cent at any time other than the first and final years, this growth will be locked in and investors will get a final return of 160 per cent at maturity. Investors might choose to do this if they prefer a degree of certainty, but they may lose out if the index subsequently rises further as this will not be passed on to them at maturity.
Bristol & West is currently the only provider to offer a seven-year guaranteed equity bond of this type. However, some investors may feel that the investment term is too long, which could make rival products with a five-year term more attractive.
Currently these are available from Birmingham Midshires and the Newcastle and Britannia building societies, but these are offered directly not through IFAs unlike Bristol & West's products.