Bristol & West has brought out the latest issue of its five-year guaranteed equity bond cash Isa.
This Isa is linked to the performance of three stockmarket indices, the FTSE 100, Eurostoxx 50 and Nikkei 225. This feature is designed to allow geographical diversification instead of relying on a single country. A full return of the original capital is guaranteed however the indices perform during the five year period. However, growth potential is capped at 70 per cent of any rise in these indices.
To calculate the returns, the closing values of each index is recorded at the start date, June 14, 2002, and these are compared with the average closing levels between June 14, 2006 and June 14, 2007. An average is produced from these figures and investors will get 70 per cent of any growth. If there is no growth, investors will get only their original capital.
The Isa may appeal to cautious investors, those who are planning to move from building society accounts to stockmarket investments and those with maturing Tessa money to reinvest.
However, the fact that it includes exposure to the Japanese stockmarket but ignores the US may undermine its claim for geographical diversity and the capital guarantee will only apply if investors adhere to the full five-year term. This means investors are locked in and if the anticipated recovery accelerates over the next five years, investors would not fully benefit because of the cap on growth.