Britannia International has established the 10th edition of its guaranteed capital equity bond.
This issue of the bond offers growth potential of 38.25 per cent over five years. Like the previous issue, 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.
There is a place for products which do not put investors capital at risk. However, this product could be seen as limited in comparison with Northern Rock Guernseys offshore fifty:fifty product, which provides income and growth.
Offshore fifty:fifty combines a guaranteed equity bond offering 70 per cent of the growth in the FTSE 100 index over five years with a high interest account paying 7.5 per cent a year for two years.
However, the requirement to split the capital equally between the two elements may put some clients off. They may prefer to put all their capital in the Britannia International product, with the certainty of a defined return at the outset.