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B&W splits Toisa

Bristol & West has established the flexible Tessa-only Isa (Toisa) which consists of a guaranteed equity bond and a five-year fixed-rate bond.

Investors have two options under the Isa. They can invest all their money in the guaranteed equity bond element or they can invest up to one-third of their capital in the fixed-rate bond, with the remainder going into the guaranteed equity bond.

The fixed-rate bond element pays interest of 5.25 per cent a year for five years and allows penalty-free withdrawals during the term. The guaranteed equity bond element is linked to the performance of the FTSE 100 index and investors get their original capital back, regardless of what happens to it.

To calculate the final returns, the closing level of the FTSE 100 index is recorded on the start date and on the 19th day of each month during the last 13 months of the term. This produces an average figure which is then compared to the starting level and investors get 50 per cent of any rise in the index.

Merrill Lynch HSBC also offers a capital protected Toisa, but it differs by tracking the S&P 500 index as well as the FTSE 100 index. It also has a shorter term of three years, which some investors may prefer because they have already had their Tessa money tied up for a long period.

The Merrill Lynch HSBC product also has higher returns of up to 76 per cent of the growth in the two indices. However, investors run the risk that the performance of the FTSE 100 could be dragged down by that of the S&P when calculating the return, which would not be a problem for the Bristol & West product.

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