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B&W offers sweet combination

Bristol & West has established the income and growth guaranteed equity bond which combines a guaranteed equity bond with a savings account.

The product has a term of six years and allows investors to place up to half of their capital in one of two savings accounts to provide a monthly income. One of the accounts offers 0.75 per cent above the Bank of England base rate for the six-year term, giving a current payable rate of 5.25 per cent a month. The other is a fixed-rate account paying 5.15 per cent a month.

The remainder of the original capital will be placed in the guaranteed equity bond element for growth. This offers 60 per cent of the growth in the FTSE 100 index plus a full capital return regardless of the index performance. The returns are calculated by recording the closing level of the index on December 14. 2005 and comparing this to an average taken over the final 12 months of the term.

A good feature of this product is that investors can choose the type of income account they want. This choice may be influenced by whether the investor needs access to their money as the fixed term account does not allow withdrawals, while the tracker account allows penalty-free withdrawals of at least 250.

Although emergency withdrawals can be made from the growth element of the product without putting the capital protection in jeopardy, withdrawals must be made in writing and must be at least 500. A GEB access fee will also be payable which may be expensive in relation to the amount withdrawn.

On an initial investment of 10,000 with a 5,000 withdrawal being made halfway through the term, assuming the Bank of England base rate is 4.5 per cent, the access fee would be 997.90 which includes a 100 administration fee.

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