Britannia International has introduced the eighth issue of its five-year guaranteed equity bond, which is linked to the FTSE 100 index.
This issue of the bond offers growth potential of 38.25 per cent, which is higher than the previous issue, which offered 33.94 per cent over five years. Like issue seven, the bond returns investors' original capital whatever happens to the FTSE 100 index during the term. Investments will accrue a fixed rate of interest at 6 per cent gross until the start of the term.
To calculate the final returns, the closing level of the index is taken at the start of the term and is measured against the average level of the index during the last 12 months of the term. If the index has risen or has remained at the same level, investors get their original capital plus 38.25 per cent gross. If the index has fallen, investors will only get their capital back.
Cautious investors who are scared of risking their capital on the stockmarket may find this bond meets their needs, especially if they want to tax benefits of investing offshore. However, there are many onshore and offshore products that could provide competition as the guaranteed equity bond bandwagon rolls on.
Scottish Life International's protected term deposit series 1 has an advantage over Britannia International's bond in that it offers a minimum return of 110.2 per cent of the investment and a maximum return of 151. However, its use of three stockmarket indices could dilute returns and Britannia International's product is less complicated.